Well, you can, but it’s probably not the best idea. Family members and friends for the fact of the matter are considered “inside” creditors, as labeled in the bankruptcy code 11 U.S.C § 101 (31)(A)(i). Because this is a loan from your family or friend and was never recorded, they are not looked at the same way as a regular creditor such as a credit card or a mortgage.
You are required to list any payments that you have made that are over $600 in your petition. But the court is going to look into where your payments went. Did you pay your mother back $800 and not any other creditors? If that is the case, the court could look at it as if you were playing “favorites” (meaning, you were choosing to pay her over another creditor) and the Trustee would have the right to go back to your mother and demand that she turn the funds that she took from you and give them to the bankruptcy Trustee for them to distribute to your creditors. Meaning that you and her both would lose out on the money.
As in any case, each case is different and if this pertains to your situation you will need to discuss it with your bankruptcy attorney, so that he or she may properly advise you.
Yes! You can still file for bankruptcy even if you are behind on alimony or child support. However, be aware that child support and alimony payments are non-dischargeable in a bankruptcy. In other words, these debts cannot be wiped out in bankruptcy.
If you are paying child support or alimony, you may get behind on these payments and the state court may threaten you with jail time for being behind. A Chapter 13 bankruptcy will usually allow you get “caught up” on these payments, avoid jail time, and pay the arrearages on the child support or alimony back through the Chapter 13 plan payments over three to five years making monthly payments to the Chapter 13 Trustee. The Chapter 13 Trustee forwards these payments to the person entitled to the child support or alimony. The bankruptcy does not stop present or current child support or alimony payments, but it can help you get caught up on these late payments and avoid possible jail time.
A cramdown in bankruptcy is when the debtor only pays the value of the item they have financed. In reality, it is a court approved way to get out of some of your contractual obligations. The court replaces the value that you are contracted to pay on a certain item with an approved current value of that item. To give an example, if John Doe financed a car and he owes $15,000 on that car, but now the car is only worth $10,000, then when he files bankruptcy he has the ability to only pay the $10,000 the car is worth. The cram down is a tool used in bankruptcy to lower a debtor’s secured debt and is filed in your Chapter 13 bankruptcy plan, subject to approval by the court (11 U.S.C.S. § 1325 (1)(5)(b)).
A cramdown is only available after a certain amount of time has passed, and that time period depends on what the item is. For example, to cram down a car, a debtor must have owned that car for at least 910 days (two and a half years) at the time they file the bankruptcy. If John Doe has owned a car for at least 910 days then he can replace the current value of the car, not how much is owed in his financing contract, on his Chapter 13 bankruptcy plan. Other items that can be “crammed down” in a bankruptcy are things like furniture, jewelry and appliances. A debtor must own these items for at least one year at the time of filing in order to use the cram down method.
A mortgage payment is not something that can usually be crammed down in the traditional sense of the term. Even if the value of a home is less than what one owes on the home, a mortgage is not something where a value can simply be replaced. In order to lower the amount one owes on their home they must file an adversary proceedings and, in general, it is a much more difficult process. Because of the difficulty and different proceedings used to adjust a mortgage payment (including second and third mortgages) cramdowns are not used to lower the amount one owes on their house. Instead, you should look into stripping a second mortgage.
Cramdowns are generally not an option in Chapter 7 bankruptcies.
When you file bankruptcy, an “automatic stay” goes into effect against all of your creditors. The automatic stay, Section 362(a) of the U.S. Bankruptcy Code, among other things, prohibits creditors from contacting you to collect a pre-petition debt. In short, no more harassing phone calls from your creditors! This is one of many advantages the law offers to individuals who file Chapter 7 bankruptcy or Chapter 13 bankruptcy.
All of the creditors listed in your bankruptcy will receive notice within 5 business days when your bankruptcy petition is filed. This notice is sent to every creditor, both electronically and by mail. Generally, most creditors will stop all collection attempts immediately after they receive notice of the bankruptcy.
Should you receive phone calls from any of your creditors after you’ve filed bankruptcy be sure and let the creditor know you filed bankruptcy and provide them with your case number, the filing date and the name and phone number of your attorney. It is important that you document all of the phone calls you receive from the creditor by writing down the date and time you receive the calls and the name of the person you talked to. If a creditor continues calling you after you’ve informed them of your bankruptcy filing, they are in violation of the automatic stay and you should contact your attorney to let them know. Most likely your attorney will call the creditor and give them a courtesy warning to stop making contact with the debtor. At that point, if the creditor continues with their collection efforts by calling or sending you bills, your attorney may choose to file sanctions against the creditor for violating the automatic stay.
When filing bankruptcy you have the option to continue to pay for your car lease payment or you can opt out of your car lease payment. In a bankruptcy you can legally be released from many of your contractual obligations, this includes things like cell phone contracts, apartment leases, and even a car lease. In a Chapter 7 bankruptcy those debts will be wiped out. In a Chapter 13 bankruptcy you will pay back only a portion of the total amount owed.
For example, John Doe has one year left on a car lease and is paying $300 a month. If he does not want to continue the lease and at the time of filing a Chapter 7 bankruptcy he will return the car (after speaking with his bankruptcy attorney first) and will no longer be responsible for that $300 payment each month. Therefore, the additional $3,600 that John Doe would have paid through the end of his lease will be included in his bankruptcy. In a Chapter 7 bankruptcy the $3,600 will be wiped out. If, instead, John Doe were filing a Chapter 13 bankruptcy then he would be responsible for a portion of the remaining balance.
There are some important things to consider before deciding not to continue the lease. First, and probably the most obvious, is that you will need to return the car. If that car is your family’s only means of transportation and is a reasonable lease you may want to think twice before surrendering the lease into the bankruptcy.
Another factor to consider is if anyone else’s name is on the lease. If you and your mother, or boyfriend/girlfriend etc. have both signed the lease then once you release that lease into bankruptcy that other person becomes solely responsible for the financial obligations of that lease. For example, if John Doe is filing a Chapter 7 bankruptcy and his mother has co-signed the lease with him, she will be solely responsible for the lease payments if he surrenders the lease.
There are a number of things to keep in mind when deciding whether or not to keep your car lease when filing bankruptcy. It is important to know your options and to understand that you can surrender the lease if it is in your best interest. If you chose to keep the lease then you would just continue your monthly payments as usual. As long as you are current on all payments most things in the lease would remain the same.
The law does not require a person to hire an attorney to file bankruptcy. The bankruptcy can be filed “pro se” where you represent yourself. However, an individual is taking a risk by not hiring an experienced attorney to navigate the court system and to ensure the paperwork is prepared correctly.
It is extremely important that all schedules required by the bankruptcy court are properly prepared and filed with the court in a timely manner. The bankruptcy court may dismiss the bankruptcy case if schedules are missing. In addition, an individual risks losing their assets – cash, houses, cars, businesses, etc. – if the bankruptcy paperwork is not prepared in a way that fully protects the filer’s assets. Read more
When most people think about attorneys, and the law in general, they think about what they see on TV. Most envision the big fancy courtrooms, attorneys arguing back and forth and yelling out objections to the other attorney’s questions. In real life, court is rarely how it appears on TV. Instead, it’s usually vastly different. Regardless, a common question we get at Duncan Law is – Will I have to go to court if I file bankruptcy?
The vast majority of people who file bankruptcy will never see the inside of a courtroom. My unscientific estimate would be that only 1 out of every 10 cases will need to appear before a bankruptcy judge, maybe less. That being said, whether you appear in court will largely be determined by the facts of your specific case. Talking with your attorney will give you a more clear idea of whether or not you have the type of case that is likely to appear in bankruptcy court.
Although only a very few cases will appear in front of a bankruptcy judge in bankruptcy court, all cases will appear at a creditors’ meeting. Check out our blog post and video on what to expect at the creditors’ meeting to learn more. Similar to what most people expect in court, you will be put under oath and asked a handful of questions. Luckily, you will typically only be in front of the Trustee for about five minutes, if not less. Your bankruptcy attorney should help prepare you for your creditors’ meeting.
Typically speaking, your money in your bank accounts will be safe if you decide to file bankruptcy. However, there are a few important things to consider.
Will My Bank Accounts be Closed in Bankruptcy?
By hiring a lawyer to prepare your petition for bankruptcy, it is our job to protect your assets. Bank accounts are one of our top priorities since it is usually a valuable asset to guard. Filing for bankruptcy does not mean that you must close all your accounts or that you surrender all your money or valuables. For the most part, your bank account will not be affected by filing for bankruptcy nor will your accounts be closed automatically.
However, before you file, it would be wise to make sure that you are in good standing with the bank that holds your accounts. You should consider switching banks if you have a credit line that will be discharged in the bankruptcy or overdraft fees wiped out. If you bank with a creditor and you are behind on payments, some banks have it in their contract that allows them access to withdraw payments automatically and without permission. This is known as a ?set-off.? Unfortunately this can happen before, during, and after bankruptcy.
Again, we almost never see banks close bank accounts just because someone files bankruptcy, unless they owe the bank money that is being wiped out in the bankruptcy. However, also be careful with credit unions. They, at times, may shut down a bank accounts if you file bankruptcy. Check out our article about the “Hidden Traps of Credit Unions When Filing for Bankruptcy” to learn more about the dangers of credit unions when filing for bankruptcy.
Use of Exemptions
When you file bankruptcy, there are exemptions that are available to help protect your personal assets, such as bank accounts. Depending upon your state there are different types of exemptions that could be used to protect your bank accounts.
One of the most commonly used exemptions in North Carolina for bank accounts is an exemption that protects the last 60 days of “earnings” which are necessary to support your family. There is no limit on the amount of money that can be protected using that exemption. However, you may be required to show the courts that the money in the bank account(s) are actually earnings and they were earned within the last 60 days or two months. Any amount outside of those two criteria cannot use that exemption.
If you do not have dependent children living in your household or your earnings in your bank account were earned longer than 60 days ago then we would be forced to use what is known as the “wild card” exemption. Your $5,000 (per filer) “wild card” exemption can be used on any type of personal property that you have, including bank accounts. It is important that you work with your attorney to ensure that your wild card is used to protect your most important personal property.
Protecting Yourself from a Set-Off
Another consideration when filing for bankruptcy is that the bank does not “set-off” your bank account. In other words, if you have a mortgage with Bank of America and also have a checking account with Bank of America they could potentially go into your checking account and take money out if you are behind on your mortgage. If you are considering filing for bankruptcy we encourage our clients to open another bank account with a bank they don’t owe money to and move their funds to that new account. However, don’t close the new account until after the bankruptcy. This will ensure that your money is protected from a set-off.
Open a New Bank Account
Finally, we always try and encourage clients to make sure that you have a bank account open at a bank that you do not owe any money to. Some banks will not let you open a checking or savings account for several years after you file bankruptcy. Opening a new account before you file will ensure that you are able to have an account to use for direct deposits and that it cannot be tampered with by any of your creditors that you have included in your bankruptcy
This is a common asked question, and a great one! With the downturn of the housing market, many people understandably want to know if they have the right to sell their property when they are in a bankruptcy.
While in a Chapter 13 bankruptcy, you can indeed sell your home while you are in an active bankruptcy, but, you must obtain permission from the court to do so. When you decide you want to sell your property, you will need to contact a realtor to put it on the market for you. At that point, you need to be upfront with them and let them know you are in an active Chapter 13 bankruptcy. When a buyer is found, the realtor will draw up a contract to purchase the home. You will then need to forward that contract to your bankruptcy attorney along with a payoff for your existing mortgage(s). At that point, a Motion to Sell Real Property will be filed with the court. It takes approximately 30 days to obtain permission from the court. If there are any excess proceeds from the sale, they will usually be applied to your Chapter 13 bankruptcy. You will rarely get a situation where the debtor gets to keep the proceeds from the sale of the home.
In a Chapter 7 bankruptcy, it is extremely rare to sell the property while in bankruptcy. When you file bankruptcy, you will either surrender (give up) your home or you will retain the property; and since Chapter 7 bankruptcies only last 3 to 6 months, there is usually no point in selling it until after you are out of the bankruptcy. Once you are out of bankruptcy, you would not need permission from the court to make the sale.
All districts and divisions have different rules, so if you are thinking of selling your home, you will need to contact your bankruptcy attorney first and discuss it with them.