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The_Pentagon_US_Department_of_Defense_buildingSource: Wikipedia Commons
I practice in the Washington, DC area. Lots of my clients work for federal agencies and contractors who require security clearances as a condition of their employment. The first question they ask when them come to see me is whether a bankruptcy filing will cause them problems with their security clearance. The short answer I give: No, it will not.
This causes surprise, in large measure because of the urban legends about bankruptcy that just aren’t true. But why won’t bankruptcy have a negative impact on a security clearance? The reason is simply because bankruptcy makes you less of a security risk.

Posted 23 weeks 6 days ago

Huis en hypotheek onder water
The U.S. Court of Appeals, Eleventh Circuit, ruled that in a chapter 13 case filed within four years of a previous chapter 7 case (a so-called “chapter 20″), the chapter 13 plan could strip a completely unsecured junior mortgage.  Wells Fargo Bank v. Scantling, No. 13-10558 (11th Cir. June 18, 2014).  In such chapter 13 plans, the junior mortgage is eliminated and never has to be paid back.
The lack of a discharge from debt at the conclusion of the chapter 13 case, due its having been filed on the heels of a chapter 7, was not viewed as a problem by the appeals court.
The debtor filed for chapter 7 on November 27, 2009, and received a discharge.  On January 1, 2011, the debtor filed for chapter 13, listing the home’s value at $118,500.  The first mortgage had a balance of $121,808; the second mortgage $79,369; and the third mortgage $24,416.
These figures indicated that the second and third mortgages were not secured by any actual value of the home.  This was due to the first mortgage balance being in excess of the home’s value.

Posted 26 weeks 1 day ago

Image courtesy of FreeDigitalPhotos.netImage courtesy of
Good bankruptcy attorneys spend a lot of time talking with their clients. They give them an awful lot of information. Sometimes clients forget.
One of the things clients sometimes forget is the requirement in the Bankruptcy Code that all of their assets and all of their debt must be included in the bankruptcy filing. This includes things that they may want to keep, such as their home or their car. It includes debts that are current and will stay current, such as a mortgage or car loan. It means that if the client says, “I don’t want to include my home/car in the bankruptcy” we will always say, “You need to. But it doesn’t mean that you’ll lose it.”

Posted 27 weeks 4 days ago

formsMost of my clients don’t have a lot of money. If they need to file for bankruptcy, they’ve usually gotten ads from “Bankruptcy Petition Preparers.” These folks advertise that they can prepare someone’s bankruptcy papers a whole lot cheaper than lawyers.
They’re right. They CAN prepare your bankruptcy papers a whole lot cheaper than lawyers.
They don’t need to go to law school. They don’t need to know bankruptcy law. They’re prohibited by law from offering legal advice–such as which chapter you should file under, how to value assets, how to fill out the schedules and Means Test, what needs to be included and what can be excluded. They don’t have obligations to the state bar or to the Bankruptcy Court. They usually don’t have malpractice insurance. They won’t appear with you for the Meeting of Creditors, or court hearings. They can’t advise you…and my clients need advice about what they should do.

Posted 27 weeks 6 days ago

mortgageReversing the Minnesota bankruptcy court, an intermediate federal appeals court ruled that a property tax refund owed to a bankrupt homeowner cannot be claimed exempt.  Manty v. Johnson (In re Johnson), No. 13-6050 (8th Cir. BAP April 22, 2014).
The appeals court said that the bankruptcy court was mistaken when it held that a Minnesota property tax refund was protected by Minnesota Statutes Section 550.37, subd. 14.  This statute provides an exemption for “government assistance based on need.”
The debtor in this chapter 7 case was an 88 year old widow who owned a home valued at $200,000 with about $150,000 in equity.  Her only regular source of income was Social Security, with occasional income from renting out a room in her home.
At the time the case was filed, the debtor was entitled to a property tax refund of $1,947.  She claimed the property tax refund as exempt pursuant to section 550.37, subd. 14, reasoning that it was government assistance.  After the bankruptcy court sustained her claim of exemption, the chapter 7 trustee appealed to the Bankruptcy Appellate Panel.

Posted 30 weeks 1 day ago

NowHiring-Flickr-413132671When someone leaves a job, is it always necessary to replace them?  The bankruptcy system’s watchdog seems to think so, even if that makes little sense.
Chapter 7 Trustees are assigned randomly to bankruptcy cases to identify and liquidate property not protected from the creditors.  They are paid $60 per case and nothing else unless they can pay something on those debts.  So they’re like commissioned salespeople, being paid a base amount per account and no more unless they can close a deal.
And deals are thinner these days.  Bankruptcy filings are down dramatically in the last three years, since the economic recovery began.  They are down over 25% in that time.  And business cases with potentially-large assets — and large commissions — are on the endangered species list.
The reality in Chapter 7 is that the vast majority of cases pay the trustee only $60.  There’s nothing to sell.

Posted 30 weeks 1 day ago

Let it go!Let the debt go!

Posted 30 weeks 4 days ago

Wipe Out Debt
Recently I ran across this post discussing the difference between bankruptcy and debt settlement.  I believe that there are a few items that need to be corrected with regards to the information contained in this post.
Before we go any further, it may be useful to talk about what bankruptcy is and what a debt settlement is.
Bankruptcy is a legal proceeding where a petition is filed with a bankruptcy court.  After certain proceedings through either a chapter 7 or chapter 13 filing (typical for most consumer debtors), debts are often discharged meaning that you are no legally obligated to pay those debts.  Your case is monitored by a bankruptcy judge and the court’s orders can be enforced through various means.

Posted 32 weeks 1 day ago

bankruptcy petition
The Judicial Conference has approved a fee increase effective June 1, 2014.
The fees for filing a chapter 7 case will increase from $306.00 to $335.00.
The fees for filing a chapter 13 case will increase from $281.00 to $310.00
This is a $29.00 increase in the filing fees.
The fees for filing an adversary proceeding will increase to $350.00 (Debtors are not charged filing fees for adversary proceedings).
Chapter 11 filing fees will increase to $1,717.00.
It gets more and more expensive for folks to achieve any relief from their debts.

Posted 35 weeks 1 day ago

151985627_f76043167b_sIn my practice, I see it all the time: an elderly couple come to talk about their debts. Inundated by credit cards and living on a fixed income, they see no help in sight.
But, their retirement can’t be garnished and the credit industry can’t get at it (in most cases). Social security is almost completely protected from creditors. And, so is the house: a credit card company can’t force you to sell your home even if you owe them a lot of money. At least not in California, and, I would guess, most other states as well.
So, what possible benefit can there be to an elderly couple to file bankruptcy? Here are four good reasons why not to file:
1. It’s humiliating. We were all taught to pay our debts; and no one wants his or her neighbors to know that they can’t handle their economic obligations.
2. It costs money. The attorney and the court have to be paid.
3. It “ruins” a perfectly good credit score.
4. It sets a bad example for the children.
Those are very good reasons not to file; but the benefits far outweigh the detriment. Four of the many advantages to filing a bankruptcy:
1. It stops the collection calls and letters.
2. It will, ultimately, improve your credit score.

Posted 36 weeks 1 hour ago