Share

Bankruptcy Law Blog

Friday, October 30, 2015

Basics of Chapter 7 Bankruptcy

What is Chapter 7 Bankruptcy and how does it work?

If you are overwhelmed by debt, you might be considering bankruptcy as a way out.  Chapter 7 bankruptcy can provide you with a fresh start if you are eligible. Our attorneys regularly determine if clients are eligible and assist them in the Chapter 7 bankruptcy process from inception to conclusion.

In order to be eligible for Chapter 7 bankruptcy, you must pass the means test.  This means that your income must be lower than the median monthly income in your state.  There are a number of exceptions to this rule under which you might also be able to qualify. 

If you pass the means test or fall into one of the exceptions, the Chapter 7 process requires that all of your assets be sold and that the proceeds from those assets be used to pay creditors in a specified manner. The process begins by filing a Chapter 7 bankruptcy petition with the bankruptcy court. 

As a debtor, you must disclose all of your financial information, including a detailed list of your assets and liabilities as well as your income and expenses. At this point, the automatic stay kicks in. The automatic stay stops most collection efforts by creditors.  Within 40 days of the submission, the court appointed bankruptcy trustee must hold a meeting of creditors. You must be present at this meeting, where the trustee and any creditors who attend will question you under oath. The trustee has 10 days from this meeting to decide whether to accept the case or find it to be abuse.

If the case is accepted, all of your assets, except exempt property, will be liquidated and used to pay your creditors. After the bankruptcy, all of your debts will be discharged, giving the debtor the fresh start you were looking for.  There are some debts that are non-dischargeable, such as tax debts and child support payments. You will still be responsible for these, even after the bankruptcy process has been completed.

The attorneys at Padgett and Robertson have extensive experience representing individuals in Chapter 7 bankruptcy cases.  If you are in the Mobile area contact us today at (251) 342-0264 for a free consultation. 


Thursday, October 8, 2015

Timing Consumer Bankruptcy

What is the Best Time to File for Consumer Bankruptcy?

In some cases, filing for consumer bankruptcy involves a strategic component, particularly if a debtor is seeking to reduce overall liability or avoid issues with an impending life milestone such as divorce. It is also true, however, that waiting too long to file bankruptcy can end up costing you more in the long run which raises the question: when is the best time to file?

Interestingly, the summer months are the most popular when it comes to the raw data of bankruptcy filings. By contrast, January and February see the lowest number of filings – the reasons for which could be anyone’s guess.

Setting the calendar aside, there can be some real benefits to filing as soon as possible. For instance, if you are facing a foreclosure and feel that you have nowhere to turn in terms of housing, filing for consumer bankruptcy will put a stay on the pending proceedings – therefore buying you additional time to devise a future housing plan.

As well, creditors are continuing to charge interest on your secured and unsecured debts each day. In many cases, a debtor has nothing to gain by waiting – and trying – to pay down debts before filing. Often, the most toxic and costly debts (unsecured credit cards) are forgiven in the process anyway.

When should an individual delay filing? If a divorce is on the horizon, a debtor will likely fair better by co-filing with a spouse as opposed to filing alone. Likewise, if two spouses are responsible for the debts together, co-filing will be virtually necessary in order to ensure the proper outcome.

Lastly, delaying filing may be the best option if you truly believe you will be able to pay down your debts without needing bankruptcy protection. Bankruptcy will create a temporary stain on your credit rating, which could make it difficult to secure a loan for a home or a vehicle. The impact will be just as negative, however, for those who believe they can pay down debt and wind up in default.

If you are concerned about when to file for bankruptcy, please do not hesitate to contact the knowledgeable attorneys at Padgett & Robertson, Attorneys at Law, in Mobile, Alabama at 251-342-0264.


Monday, September 21, 2015

Bankruptcy & Family Law: How filing affects domestic matters

If I file for bankruptcy, can I avoid or reduce some of my alimony arrears?

Getting behind on the bills can be exceptionally stressful, and a consumer bankruptcy action can help alleviate some of the frustration that comes with overwhelming monthly obligations.  There are certain debts, however, that  are not dischargeable through the consumer bankruptcy process, and the Bankruptcy Code makes clear that most domestic matters cannot be avoided even with a total Chapter 7 liquidation.

No matter how difficult the financial landscape, child support arrears cannot be reduced, negotiated or discharged under any circumstances. However, filing for bankruptcy may help a debtor get caught up on the outstanding balance of the overdue support, and may even help reduce some of the other debts owed to unsecured creditors. When a debtor files for Chapter 13 protection, his or her debts will be prioritized – with child support arrears at the top of the list. The monthly child support payment will be amortized over the length of the repayment plan period and will be paid to the trustee, who will ensure the amount is properly distributed to the child(ren) in need of support.

Bankruptcy can also have an impact on divorce proceedings, and debtors are encouraged to seek thorough legal counsel prior to filing for bankruptcy if considering marital dissolution. In some instances, it may make sense to file for bankruptcy prior to divorce, as this can result in significantly reduced filing fees and court costs. Moreover, joint debtors may be able to have some of their debts discharged and forgiven, meaning the debts need not be distributed during the divorce action.

On the other hand, Chapter 13 consumer bankruptcy can take 3 to 5 years to complete, depending on the payment plan – which may not be feasible if a divorce is on the horizon. Likewise, those seeking Chapter 7 protection may have difficulty meeting income eligibility requirements by filing together, making it more beneficial to go through the divorce first.

If you are considering bankruptcy and are not sure how the proceeding will interface with your pending domestic matter, please do not hesitate to contact Padgett & Robertson in Mobile, Alabama today: 251-342-0264.


Friday, August 28, 2015

Moving Past Bankruptcy: How the Process Impacts Eligibility for Future Secured and Unsecured Loans or Credit

I just finished bankruptcy, will I ever be able to take out a loan again?

While bankruptcy will undoubtedly appear on your credit report, and may initially negatively, impact as a former debtor, the long-term effects of a bankruptcy filing are minimal compared with the financial freedom one can experience as a result of discharging toxic debt obligations.

Under changes to federal regulations, creditors are required to report a $0.00 to credit reporting agencies if a debt has been discharged in bankruptcy. Moreover, there are a number of techniques for debtors to consider in order to repair their credit during the months and years immediately following bankruptcy.

While it may seem counter intuitive, applying for new unsecured revolving accounts is one way to boost your credit rating – assuming, of course, that your balances are paid in full at the end of each billing cycle. The reason for this is that creditors like to see a debtor is holding available credit without using it or “maxing it out,” thus demonstrating self-control and a character for creditworthiness.

Bank loans are another way to establish credit, but it may be necessary to apply with a co-signer in the first few years following bankruptcy. For the reasons described above, a loan that is paid on time and according to the terms of the promissory note will help establish a reputation for creditworthiness, resulting in an increased credit score.

Lastly, remember that patience and steadfastness are an important mental component to rebuilding credit. Your credit did not plummet overnight, so it will take a few years to restore it completely. Over time, however, with careful practices and a dutiful financial attitude, you can restore your credit to a rating better than ever before. In additional, bankruptcy will eventually “fall off” your credit report after a period of 7-10 years.

If you are considering consumer bankruptcy protection and would like to discuss your options, we encourage you to contact Padgett & Robertson, Attorneys at Law, representing clients throughout southern Alabama. We are located in Baldwin County, Alabama and can be reached at 251-342-0264.


Friday, August 21, 2015

Bankruptcy and Foreclosure

Can bankruptcy help to avoid or delay foreclosure?

For clients in danger of home foreclosure, filing for bankruptcy can be a lifesaver. In many situations, filing Chapter 7 bankruptcy can put off foreclosure for a number of months and filing Chapter 13 bankruptcy can even enable a person to save his or her home.

The Process of Foreclosure

Foreclosure results when a homeowner falls well behind on mortgage payments. The bank holding the mortgage does not normally begin the process until the homeowner has missed paying the mortgage for a period of at least three or four months. Once the bank begins the process of attempting to foreclose through auctioning off the property in question, the homeowner, presumably having exhausted other avenues such as a short sale or loan forbearance, may benefit by filing for bankruptcy. Contrary to common belief, some homeowners facing foreclosure may actually be able to improve their credit with a bankruptcy filing.

Types of Personal Bankruptcy: Chapter 7 and Chapter 13 

Chapter 7 and Chapter 13 differ in a few significant ways. Chapter 7 bankruptcy discharges most debts within six months, but some debts remain, most commonly student loans, alimony or child support. People who file for Chapter 7 can't file again for eight years. Chapter 13 bankruptcy, on the other hand, consolidates the homeowner's debts and creates a payment plan. Such a plan typically lasts from three to five years and allows the filer to retain certain assets, such as a house or car and some savings, although laws vary from state to state. Homeowners whose income level is over a certain amount must file for Chapter 13 and once they have filed, are not permitted to file again for two years. Both of these types of bankruptcy can be utilized if your home is in foreclosure. 

If you have hit some serious financial obstacles and are in danger of losing your home, you should consider the possible benefits of filing for bankruptcy. Our knowledgeable bankruptcy attorneys at Padgett & Robertson caringly serve clients in Mobile and Baldwin County, Alabama. Please contact us at (251) 342-0264. 


Thursday, August 20, 2015

Bankruptcy Can Stop Wage Garnishments

Can filing for bankruptcy protect you from having your wages garnished?

Undergoing bankruptcy can be beneficial for individuals whose wages are being garnished. Filing for bankruptcy may help stop a creditor from garnishing your wages and may even enable you to retrieve some of the wages that were garnished prior to bankruptcy proceeding. 

The Automatic Stay

Once an individual files for bankruptcy the automatic stay goes into effect. The automatic stay stops creditors from most actions designed to collect past due amounts. This effectively stops wage garnishments for the duration of the bankruptcy. In cases where the creditor has a valid reason, however, it may ask the court to lift the stay. This happens mostly in cases where the debt is considered non-dischargeable.  Situations that involve non-dischargeable debts that may result in the suspension of an automatic stay include:

• Child support and alimony;
• Tax proceedings; and
• Repaying pension loans.

Most commonly, the automatic stay is suspended in cases of domestic support obligations.

Wage Garnishments After Bankruptcy

The automatic stay may end in one of three ways: when you receive a notice of discharge, when your case is dismissed without a discharge or when the court lifts the stay. If a particular creditor, such as a credit card company, is included in the discharge, your wages can no longer be garnished to collect any outstanding debt. If your case is dismissed without a discharge, however, the creditor can continue to have your wages garnished.

Recovering Wages Garnished Prior to Bankruptcy Filing

When particular conditions are satisfied, you may be able to retrieve some wages that were garnished before you filed for bankruptcy. Typically, you can receive back wages garnished within the 90 days prior to bankruptcy filing if they were over $600 and if you have sufficient exemptions to cover them. Exemptions are often made for items such as a motor vehicle or a wedding ring. It is important to have an experienced attorney in order to negotiate possible recovery of garnished wages. Much will depend on whether you have filed for Chapter 7 or Chapter 13 bankruptcy.

Ensuring That Garnishments Stop in a Timely Fashion

Once you have filed for bankruptcy, you must provide a complete list of creditors to be officially notified. In order to protect yourself from continuing to have your wages garnished, it is necessary to directly inform the payroll department of the company that employs you. It is also important to inform the levying official, usually the local sheriff, of your bankruptcy in order to stop the garnishment process as quickly as possible.

If you are considering filing for bankruptcy, particularly if your wages are presently being garnished, and you have questions, please get in touch with one of the skilled, experienced bankruptcy attorneys at Padgett & Robertson.  We are available for a free consultation in Mobile and Baldwin County at (251) 342-0264.


Monday, August 17, 2015

Congress Considering Amendments to College Tuition ‘Clawback’

What is a college tuition ‘clawback’ in bankruptcy? 


Attending college can be one of the most costly expenses a family endures – and, for some, the increasing tuition rates ultimately prove fatal to their personal financial portfolio, resulting in consumer bankruptcy. 

Under current bankruptcy guidelines, debtors engaged in the bankruptcy process are sometimes able to recover money spent in the years immediately prior to filing that could have been spent on paying down debts and avoiding insolvency. In order to qualify for this recovery – known as a ‘clawback’ – the debtor must prove that he or she did not get a “reasonably equivalent value” for the expense. Historically, the clawback principle was applied to personal loans or money spent assisting family members; or to below-market asset transfers occurring immediately prior to the bankruptcy filing. 

However, in recent years, bankruptcy courts have seen a significant influx of debtors seeking to clawback tuition payments made on behalf of their children enrolled in a college or university. In so doing, parents assert that they did not receive a reasonably equivalent value for the tuition payment – the child did. As a result, bankruptcy trustees are engaging in increasing litigation against colleges and universities to recover the amount of money spent on tuition – and are for the most part successful in this endeavor. 

In response to this prevalent trend, lawmakers have proposed amendments to the Bankruptcy Code to prevent the clawback of college tuition payments. More specifically, the amendments would alter the current list of expenses eligible for clawback, which also includes charitable donations. The bill was introduced in the U.S. House of Representatives in May 2015, and is currently under review. 

According to a recent article published in The Wall Street Journal, 25 colleges and universities have thus far been asked to return portions of students’ tuition money under the tuition clawback allowance. 

If you are considering a consumer bankruptcy petition and would like to speak to a reputable attorney in Alabama, contact Padgett & Robertson today: (251) 342-0264. 

Friday, August 14, 2015

Five Things to Know About Consumer Bankruptcy Credit Counseling

Is credit counseling mandatory prior to entering bankruptcy proceedings?

In most cases, a debtor considering bankruptcy is required to work through credit counseling courses prior to even beginning the Chapter 7 or Chapter 13 process. If you are considering bankruptcy, the following tips may help you better prepare for this important preliminary step: 

Tip #5: Counseling required for all debts – Under bankruptcy regulations, credit counseling is required whether the debts are primarily business, personal, or an equal mix of both. Moreover, if a married couple is filing jointly, both spouses must go through counseling. 

Tip #4: Qualified counseling – Not just any credit or debt counselor will do. Under the rules, debtors must meet with a non-for-profit budget and credit-counseling agency officially approved by the United States Treasury. A list of qualified professionals is available from the Bankruptcy Court Clerk’s office. 

Tip #3: Multiple formats available – Credit counseling is available in a number of languages to meet the needs of individual debtors. Likewise, the counseling sessions may take place in person, over the phone, or over the Internet. 

Tip #2: Only limited excusals available – Credit counseling is generally required for everybody. However, there are three scenarios that could give rise to an excusal: (1) the debtor's advanced mental disease or incapacity so severe that credit counseling would prove futile (2) the debtor's physical disability that makes participation impossible (3) the debtor's active military duty in a combat zone. 

Tip #1: Counseling may be obtained late – In limited circumstances, the court may allow debtors to obtain counseling after the bankruptcy petition is filed, but only upon a showing of certain unique circumstances. If these stipulated criteria are met, a debtor may have up to 30 days after the filing to complete credit counseling. 
Contact an Alabama bankruptcy attorney today! 

If you are considering consumer bankruptcy, please do not hesitate to contact the Mobile and Baldwin County, Alabama bankruptcy attorneys at Padgett & Robertson today: (251)342-0264. 


Tuesday, July 14, 2015

Former Adams Produce Owner Under Fire, Facing Criminal Charges

Is it possible that criminal charges will result from information obtained in bankruptcy proceedings?

 

In 2010, Adams Produce, a large family-owned company with a long history in Birmingham, was sold to a group of investors. Just two years later, in 2012, the company filed for bankruptcy and closed.  Four hundred employees were left without jobs and the company owed the employees almost three weeks back pay.  The company also owed almost $16 million to vendors, creditors, and produce suppliers.  The company blamed decreasing margins and lawsuits from rival companies in the bankruptcy filing.  Once the company filed, the United States government cancelled a recently signed, four and a half year contract for produce worth $41 million.    

Prior to the sale and bankruptcy, the family-owned business brought in outside managers to lead the business.  The family eventually sold ownership stakes to the outside CEO, CFO, COO, and an investment firm, CIC Partners.  The bankruptcy and closing impacted the original family, specifically Carl Adams III who claimed that he lost $5 million and suffered emotional and physical damage as a result of the company’s failure.  Adams was forced to return to the workforce and forgo retirement while watching his family business shut down.  Adams blamed the company’s former CEO and CFO, for most of the problems associated with the closing and bankruptcy.  

Former CFO John Stephen Alexander had insight into the company’s finances and did not inform CIC of the issues that Adams Produce faced. Adams claimed the CFO had a duty to report the fraud in the government contract and was guilty of duping people into buying into a failing company along with the CEO. Alexander was sentenced on separate fraud charges and served a prison sentence related to those charges.

If you believe that you have done something illegal and are now considering filing for bankruptcy, you should speak to an experienced attorney before making your next move.  The attorneys at Padgett and Robertson have extensive experience helping companies in the Mobile and Baldwin County areas navigate bankruptcy proceedings.  Contact us today at (251) 342-0264 for a free consultation.      


Monday, July 13, 2015

Recent Bankruptcy Law Changes Lead to Increase in Personal Property and Homestead Exemptions

What are the current asset thresholds and exemptions for consumer debtors considering a Chapter 7 liquidation or Chapter 13 restructure?


As a foundational principle, bankruptcy is an appropriate financial step for anyone whose debts and liabilities far exceed assets – and it is no longer feasible to make monthly debt payments without extreme hardship. While bankruptcy debtors are expected to be highly cash-strapped and tapped of most of their assets, the law does not mandate total poverty – and exemptions have been worked into the law to ensure debtors are able to keep some of what they have earned in both real and personal property assets. 

While the Bankruptcy Code is of course a federal statute, bankruptcy courts are often required to follow certain rules and procedures set forth by the state in which the debtors are situated. One such state law, known as the exemption threshold, varies significantly from one state to the next and dictates the amount of property a debtor may own in order to qualify for Chapter 7 or Chapter 13 bankruptcy proceedings. 

Alabama increases exemption thresholds 

Unlike its peninsular next-door-neighbor with one of the highest thresholds in the nation, Alabama’s threshold is one of the lowest in the United States – meaning debtors must be very insolvent before qualifying. However, in June, 2015, the Alabama legislature made substantial changes to its bankruptcy exemptions, resulting in broader eligibility criteria and greater opportunity for Alabamans to qualify. 

The personal property exemption refers to the amount of personal items a debtor may retain and still qualify for bankruptcy. Historically, Alabama only allowed an individual debtor to retain $3,000.00 worth of personal items, and up to $5,000.00 in equity on real property. If a married couple were to file for bankruptcy together, the home equity exemption would rise to $10,000.00. 

Under the recent changes in the law, however, individual debtors may now exempt up to $7,500.00 in personal property, and home equity up to $15,000.00 (for married couples). This jump was calculated to allow for more citizens to qualify for debt relief while still maintaining some semblance of financial integrity in the process. 

If you are considering a Chapter 7 or Chapter 13 bankruptcy proceeding, please do not hesitate to contact the Mobile and Baldwin County, Alabama bankruptcy attorneys at Padgett & Robertson today: 251-342-0264. 

Friday, July 3, 2015

Supreme Court Issues Ruling on ‘Underwater Mortgages’ & Bankruptcy

I currently owe more on my home than it is worth, and I currently have two mortgages on the property. If I pursue Chapter 7 bankruptcy, will the debts be discharged? 



The phrase “Chapter 7 bankruptcy” derives its name from the seventh chapter of the U.S. Bankruptcy Code wherein debtors are afforded an opportunity to liquidate a number of debts and forever discharge the obligations. While not all debts are dischargeable (e.g., child support arrears), a number of both secured and unsecured debts may be voided following the Chapter 7 procedure. 

In a recent case before the U.S. Supreme Court, the nine Justices were tasked with determining whether, in the event a debtor is ‘upside down’ on his residential home loan, he could discharge junior liens when the value of the property does not even cover the outstanding balance of the primary mortgage. In other words, if a property is encumbered by two or more outstanding mortgages, can its diminished value work to eliminate those mortgages executed at some point after the first and primary mortgage. 

And, in a rare, resounding, unanimous opinion: No. 

With all nine justices in agreement, the Court held that Chapter 7 liquidation proceedings are not designed to allow for the dismissal of junior liens, regardless of the value of the home and the surrounding circumstances. Also unusual, the opinion barely reached seven pages, and took a straightforward, objective approach to the problem by asking: What does precedent say?  

In 1992, the Court considered a similar case involving a partially-underwater residential home mortgage meandering its way through the bankruptcy process. In that case, the plaintiffs urged the Bankruptcy Court, and eventually the Supreme Court, to reduce the value of the outstanding lien to that of the fair market value of the home. That way, when the collateral was sold, the bank holding the original mortgage would be paid off in full and any remaining liens would be discharged. However, the Court didn’t buy that argument in 1992, and it didn’t opt to buy it today. 

Instead, the Court held that junior liens must remain in place, even if the value of the home is nowhere near enough to conceivably pay the debt. 

If you are considering personal bankruptcy, contact Mobile, Alabama’s premier bankruptcy law firm, Padgett & Robertson today at (251)342-0264. 


Archived Posts

2017
2016
2015


Bankruptcy Law News

Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



© 2017 Padgett & Robertson
4317 Downtowner Loop N., Mobile, AL 36609
| Phone: 251-342-0264

Personal Bankruptcy | The New Bankruptcy Law | Testimonials | About Our Firm | Bankruptcy | Client Resources | Getting Started

Facebook

Attorney Website Design by
Zola Creative