Chapter 7

Published on: February 22, 2016

Your Credit Report during Bankruptcy

What your creditors are able to report to the credit bureaus is controlled by the Fair Credit Report Act, also referred to as the FCRA, and requires your creditors to only report information that is accurate and correct. Once you receive your bankruptcy discharge your creditors are only allowed to report your discharged debts as having a balance of zero, along with the fact that is was included in a bankruptcy. In order to ensure that your creditors are reporting the most accurate information after having received your bankruptcy discharge, it is best to wait 30 to 60 days after receiving your discharge and then pull your credit report from all three credit bureaus. Once you have your credit reports from each of the three credit bureaus you should review each of them in great detail; making sure that each of your debts included in your bankruptcy is being reported as having been included in the bankruptcy and with a zero balance. If one of your creditors is incorrectly reporting the status of one of your debts you should then dispute it through the FCRA. Keep in mind that a creditor should never report a discharged debt as having a balance, being active, late, charged off, or as being a new debt.

If you are planning on filing a Chapter 13 Bankruptcy, your debts will not appear as having been included in the bankruptcy and with a zero balance until you finish your Chapter 13 Plan and receive your discharge; approximately 5 years after you file. However, as soon as you file your bankruptcy, your creditors are supposed to stop reporting to the credit bureaus under the original credit agreement. If they choose to continue reporting, they should report according to your confirmed Chapter 13 Plan. This will allow your credit report to slowly begin to improve shortly after you file bankruptcy, instead of having to wait the entire 5 years before your credit begins to improve. If a creditor is reporting information that is not correct, you dispute it through the FCRA just like you would if a creditor was reporting incorrect information after you received your discharge.

How creditors should report debts during a Chapter 13 Bankruptcy Case was decided in a 2008 case. Before then, there were no rules telling creditors how they should report a debt that is being included in a Chapter 13.

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Published on: December 11, 2015

My Wages are being garnished. Will filing bankruptcy stop the Wage Garnishment and help me get my garnished wages back?

By Kendal Schoepfer

If you are thinking of filing bankruptcy due to a Wage Garnishment Order, you are probably wondering whether or not the bankruptcy will simply only stop future garnishments or whether it will also help you to get your garnished wages back. As long as your wages are not being garnished due to unpaid child support or student loans for example, then filing bankruptcy will stop your future wages from being garnished and it might be possible to get some of your garnished wages back. But, the surroundings circumstances must be in your favor in order to get you wages back; specifically,

The wages garnished must have been $600.00 or more within the 90 days prior to filing bankruptcy as you can only recover garnished wages from the 90 days preceding filing bankruptcy; and
You can exempt the wages once they are returned to you.

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Published on: November 18, 2015

Can I file a Personal Bankruptcy with a Multi-Member Limited Liability Company (LLC)?

By Kendal Schoepfer

Yes an owner of a LLC can file bankruptcy in Florida. There is nothing that prevents a member of a multi-member limited liability company (MMLLC) from filing a personal bankruptcy in Florida or anywhere else in the United States. Additionally, if a member files a personal bankruptcy, the assets of the MMLLC can be protected from being taken by your bankruptcy trustee to settle your personal debts. This is because assets of a Florida multi-member LLC are not considered part of your bankruptcy estate. Charging orders are the exclusive remedy against a multi-member LLC in Florida. Once a charging order is obtained any distribution you might be entitled to receive from the multi-member LLC could be taken by the party holding the charging order. Most creditors find a charging order unattractive because along with the right to obtain distributions comes the responsibility for income taxes on the income generated by the ownership interest in the Florida LLC.

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Published on: November 3, 2015

Can Bankruptcy resolve my personal business debt?

By Kendal Schoepfer

All too often business owners are forced to file personal bankruptcies when their corporation or LLC fails. This often comes as a shock to them as they thought they had shielded themselves from being personally liable for their business debts when they created their corporation or LLC.

There are many bankruptcy options for people with personal business debt. Which option is right for you depends on whether your business is a sole proprietorship, LLC or corporation; whether you are personally liable for your business’ debts; and what your goal is for your business moving forward.

The scenario we will address today is one in which you have a corporation that is liable for a few business loans as well as a couple of commercial leases. You no longer wish to continue operating the corporation, the corporation has no assets, and you want to make sure you cannot be sued personally for these debts. Unfortunately you personally guaranteed each debt, because you quickly found out that as a small business it is impossible to obtain a loan or lease without personally guaranteeing them.

Chapter 7 Bankruptcy

If your income is low enough to qualify for a Chapter 7 Bankruptcy, and most of your assets can be protected, a Chapter 7 is the easiest and fastest option for you. A Chapter 7 will absolve you of all personal liability for all of the corporation’s loans and leases as well as any personal credit card or medical debts you may have. However, the corporation will remain liable for the business debts, so it may make sense to also file a business Chapter 7 for your corporation. In addition, you may also want to speak with a CPA regarding the advantages of revoking your S-Election to become a C-Corporation prior to filing as you may trap forgiveness of debt income inside the business.

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Published on: October 23, 2015

Homeowner Association (HOA) Fees and Bankruptcy

By Kendal Schoepfer

When filing bankruptcy, whether it be a Chapter 7 or a Chapter 13, and you own your home or some other piece of real property that has Homeowner Association (HOA) Fees, it is very important to understand what will happen to your past due HOA fees and your HOA fees that will become due after filing bankruptcy. Understanding what your responsibility will be regarding your HOA fees before and after filing bankruptcy, can help you determine when and if you want to file.

If you are behind on your HOA fees and choose to surrender your real property when you file bankruptcy, all HOA fees that became due before you file will be discharged through your bankruptcy. HOWEVER, all HOA fees that become due beginning the day after you file are not dischargeable. This means that you are no longer liable for the HOA fees you owed before the day you file bankruptcy, but you are responsible for all HOA fees that became due after you file.

This situation has been addressed by the 11 U.S.C. § 523(a)(16) of the United States Bankruptcy Code, which states “for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.”

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Published on: October 20, 2015

What is a 341 Meeting and what should I expect?

By Kendal Schoepfer

A 341 meeting, also known as the “Meeting of Creditors,” is held roughly 30 days after you file a Chapter 7 or Chapter 13 Bankruptcy. A lot of clients feel very intimated about the thought of this meeting, but in reality, it can be quite short and very easy. Of course, this depends all on how well your bankruptcy petition was prepared and how truthful you were in your petition. In short, if you were truthful on your petition and prepared it to the best of your ability, then you should have nothing to worry about and your 341 meeting should go very smoothly.

What is the purpose of the 341 meeting?

The original purpose behind the 341 meeting was to give your creditors the opportunity to scrutinize your affairs. In other words, it is your creditors opportunity to try to find any assets you have that can be sold by your Trustee and then the proceeds dispersed amongst your creditors. However, in reality, creditors rarely attend these 341 meetings. Instead, it is another opportunity for the Trustee to ask you questions about your petition and the financial documents you previously provided to your Trustee. The Trustee is in essence searching for any asset you may have omitted accidentally or on purpose that can be sold to pay your creditors. Again, if you prepared your petition truthfully, then the meeting should not last very long.

Questions the Trustee may ask you at the 341 meeting.

It is always much less stressful going into an unknown situation if you can prepare yourself for it. Therefore, below is a list of questions the Trustee may or may not ask you at your 341 meeting.

State your name and current address for the record.

State your name and current address for the record.
Please provide your picture ID and social security number card for review.

a. If the documents are in agreement with the § 341(a) meeting notice, a suggested statement for the record is:

“I have viewed the original state of ________ drivers license (or other type of original photo ID) and original social security card (or other original document used for proof) and they match the name and social security number on the § 341 (a) meeting notice.”

If the documents are not in agreement with the 341(a) meeting notice, a suggested statement for the record is:

“I have viewed the original social security card (or other original document used for proof) and the number does not match the number on the § 341(a) meeting notice. I have instructed the debtor (or debtor’s counsel) to submit to the court an amended verified statement by [date], with notice of the correct number to all creditors, the United States Trustee, and the Trustee, and to file with the court a redacted copy of the notice, showing only the last four digits of the social security number, and a certificate of service.”

When the documents do not match the petition, the Trustee shall attempt to ascertain why, and shall report the matter to the United States Trustee.

If the debtor did not bring proof of identity and social security number, the Trustee shall determine why.

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Published on: October 17, 2015

When Do I Know it is Time to File Bankruptcy?

By Kendal Schoepfer

The thought of having to file bankruptcy can be very scary. There are a lot of unknowns at first. One of the biggest unknowns is determining when it is time to finally give up, throw in the towel and actually declare bankruptcy. Meeting with an experienced bankruptcy attorney can be very helpful, but if you are not quite ready to speak with an attorney, here are a few questions to ask yourself if you are trying to decide if you should file bankruptcy now.

Are you only able to make your minimum credit card payments or no payments at all?
Are your wages being garnished by a Wage Garnishment Order?

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Published on: October 13, 2015

What you need to know about bankruptcy?

By Kendal Schoepfer

Filing bankruptcy is definitely not an easy decision to make and should not be taken lightly. If you are considering bankruptcy, then you are probably already overwhelmed by your debt and having to make a very important decision, such as whether or not you should file bankruptcy, can be extremely stressful. However, the more unknowns you can uncover about bankruptcy while trying to make this very important decision, the more it can help elevate some of the stress. You might not even know what questions you need answered and; therefore, below is a list of some of things you might need to know that may give you somewhere to start.

You most likely have time to assess your financial situation before making your very important decision to declare bankruptcy. This is of course as long as you are not already facing a time-sensitive situation, such as a repossession or foreclosure.

If you are married, your spouse does not have to file with you. And, if you file without your spouse, your spouse’s credit will not be affected.

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Published on: October 8, 2015

How will Bankruptcy affect my current job and future employment?

By Kendal Schoepfer

Debtors often file bankruptcy too quickly without first considering what, if any, ramifications a bankruptcy may have on their current employment or future employment opportunities. Luckily, in most instances, filing bankruptcy should not affect your current employment, but could play a role when applying for a new employment opportunity and this is why:

If you file a Chapter 7 Bankruptcy it is actually unusual for your employer to find out that you have filed for bankruptcy unless a creditor has an active wage garnishment order against you. You will then have to inform your employer of the bankruptcy in order to stop the wage garnishment from continuing, but, in reality, if your employer was already served with a wage garnishment order, then they already know you have been having financial difficulties and may even welcome the bankruptcy.

If you file a Chapter 13 Bankruptcy your employer will still only find out of the filing if, like with a Chapter 7, you have a wage garnishment order against you. Your employer may also find out if your bankruptcy Trustee requires a wage deduction order. A wage deduction order requires your employer to deduct your monthly Chapter 13 Plan Payments from each of your paychecks and to send it directly to your Trustee in an attempt to help you keep your Chapter 13 Plan Payments current.

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Published on: October 2, 2015

Chapter 7 Bankruptcy and Your Second Mortgage

By Kendal Schoepfer

You filed a Chapter 7 Bankruptcy and have received your discharge. Among the debts included in your Chapter 7 Petition was your first and second mortgage. You reaffirmed your first mortgage (you elected to remain financially liable for your first mortgage) because you wanted to keep your home, but did not reaffirm your second mortgage. Therefore, you are no longer financially liable for your second mortgage. This seems like fantastic news! You get to keep your home, but no longer have to pay your second mortgage. Right? Unfortunately, this is not the case.

Although you no longer have to pay your second mortgage because you are no longer financially liable for the debt, your second mortgage still has a lien on your home. When you received your first and second mortgage, they each placed a lien on your home in order to secure their interest in your home. These liens allow each mortgage to foreclose on the home in the event you default on your payments. Unfortunately, the bankruptcy only removed your financial liability for your second mortgage. It did not remove the lien the second mortgage placed on your home. Consequently, your second mortgage maintains the right to foreclose on your home if you default on your payments.

So what do you do? You must payoff or settle your second mortgage before your second mortgage forecloses on your home or before you sell your home, whichever comes first. However, when you need to settle your second mortgage largely depends on how much your home is currently worth and how much you owe on your first mortgage. If your second mortgage chooses to foreclose on your home, then your second mortgage must payoff your first mortgage in order to hold the home free and clear. In other words, if your home is only worth $200,000, but you owe $250,000 on your first mortgage, then your second mortgage is not likely to foreclose at the current time because they would have to pay your first mortgage $50,000 more than what the house could be sold for. If you are currently in this situation you have the luxury of not having to try settling your second mortgage immediately. You can take time to save as much money as possible in order to try to settle your second mortgage for a lower amount in one lump some. You also have the option of simply continuing to make your normal monthly payments if you are current on your payments. Regardless of what you decide to do today, it is important to know that if and/or when you decide to sell your home, your second mortgage will have to be settled in order to complete the transaction.

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