Under the Federal Rules of Bankruptcy Procedure, your creditors must file their proofs of claim within 90 days after the first date set for the Section 341 first meeting of creditors.  Since 341 hearings are usually set about 30 days after you file, this means that, generally, creditors have about 4 months to file their claims.  The deadline for creditors to file claims is called the bar date.

What happens, however, if a creditor fails to file a proof of claim in your Chapter 13.  If the claim is an unsecured claim, like a credit card debt or a medical debt, that creditor does not get payments from the Chapter 13 trustee and when the final discharge order is issued, that unsecured creditor’s claim is discharged, or wiped out.  Assuming you provided a valid address, unsecured creditors who received notice but who do not file a proof of claim cannot come back and sue you post discharge.

Secured and priority creditors are a different story.

In the case of a secured creditor, like a mortgage company or a vehicle lender, the Chapter 13 discharge would wipe out your personal liability but the lender’s lien against the property remains valid.  Thus, your vehicle, house, furniture, jewelry or other secured debt could be repossessed or foreclosed post bankruptcy, although you would not have any personal liability for any deficiency claim.

While some of these items may lose significant value during the 5 years of your plan, some secured collateral does not lose value and could be at risk.  Further, some secured claims can be crammed down in a Chapter 13, thus reducing the balance to the value of the collateral.

Priority debts like taxes and child support will survive your bankruptcy.  If these creditors do not file claims, your unsecured creditors will get a higher percentage recovery and when your case is over you will owe the tax or child support, plus interest and/or finance charge and you will have paid your unsecureds more than they would have received if the priority creditor had filed a claim.

Your attorney will advise you about how to proceed, but in many cases it can be to your advantage to file a substitute proof of claim on behalf of your creditor if that creditor does not file a claim within the designated time window.

Filing a claim on behalf of a creditor is simple, although this process should be handled by your lawyer.  Substitute claims must be served on the creditor who may object to your claim calculation.  If the creditor does not object in a timely manner, that claim will be considered binding and will protect you if the creditor tries to come after you.

Your lawyer should have on his checklist a reminder to review all claims as of the bar date and to advise you regarding the filing of substitute proofs of claim.  Bar date review is another way that your attorney can help maximize the benefits of Chapter 13 bankruptcy.

By Jonathan Ginsberg

The post Why Would You Choose to File a Proof of Claim on Behalf of a Creditor in Your Chapter 13 appeared first on Tennessee Bankruptcy Blog.

First, the author suggests that before taking any steps toward legal action, you should first obtain your credit report from a credit bureau.  The three major credit bureaus are Equifax, Experian, and TransUnion and you can obtain free copies of your credit reports online at AnnualCreditReport.com.  Your credit report will include the names of your creditors, the names of any collection agencies used by those creditors and the amounts owed to each.

You may find that when all of your credit accounts are laid out in front of you, your debt situation may appear less overwhelming than you had originally anticipated.  You may find that by simply eliminating certain non-essentials from your budget, you will be able to pay off your debts and avoid bankruptcy entirely.

You also may be able to use the information from your credit reports to negotiate and set up your own payment plan with your creditor(s).  Of course, if you and your creditor both agree to an “informal” payment plan, it is highly recommended to confirm your agreement in writing.  Beware that in the negotiation process, creditors may want you to sign “consent judgments” or other legal documents that may waive some of your rights.  You should, of course, first speak with an attorney before signing any type of binding legal document or contract.

Consumer Credit Counseling, or CredAbility, also serves an important role as a common alternative to bankruptcy.  As long as you have a steady income and your debt is fairly manageable, CredAbility may be able to help you set up a payment plan whereby you pay back your debts over an extended period of time.

Though CredAbility can serve as a great alternative option to bankruptcy given the right circumstances, one if its major drawbacks is its inability to help you with your car or house payments.  In addition, as a non-profit organization financed by MasterCard and Visa, CredAbility cannot help you if you owe money to other credit card companies such as American Express or Discover.  Third, a CredAbility payment plan may severely wreak havoc on your credit as this type of payment plan is considered “delinquent pay” by the credit bureaus.

As an aside, you should probably avoid private debt consolidation companies like the ones who advertise on the radio and TV.  Not only do these companies charge outrageously high fees, but also they attempt to lure the desperate debtor in with ridiculous and unfounded promises to magically make debt disappear.  In other words, there are no “secrets that the credit card companies don’t want you to know.”

Finally, you may see mistakes on your credit reports that can be removed relatively easily with a challenge letter.  You also potentially have recourse for financial damages against the improperly reporting creditor and possibly even the credit reporting agency if you can show that the mistake has caused you harm.

Bottom line: perform a little due diligence on your credit profile and you may find that bankruptcy is not the obvious choice.

The post What are My Alternatives to Bankruptcy? appeared first on Tennessee Bankruptcy Blog.

Why did this happen?  The retirement funds at issue were contained in a Merrill Lynch IRA that appeared to constitute a qualified retirement account by the IRS.  Merrill Lynch even provided the debtor with a letter from the IRS stating that IRA accounts of this type had been deemed qualified.  So far so good.  Qualified retirement accounts are “exempt assets” in Tennessee bankruptcy cases.

The problem was this – the fine print of the account contained two problems:

The post Retirement Account Documents – Read the Fine Print appeared first on Tennessee Bankruptcy Blog.

If the funds received are a gift, the funds would count as income for means test purposes and these funds (assuming they are not yet spent) would be an asset of your bankruptcy estate and potentially reachable by a bankruptcy trustee.

By contrast, if funds received are treated as a loan, these funds would not count as income for means test purposes, although cash still on hand would be an asset.

Mr. Markus also notes that if you pay back the lender before filing, the repayment could have bankruptcy implications.  He is referring to the issue of preferences, which are provisions of the Bankruptcy Code that allow trustees to recover money from lenders in certain situations.

Your lawyer can advise you regarding the preference issues and about the means test as well as exemptions that can allow you to protect cash and other property from the trustee’s reach.  However, as Mr. Markus points out a threshold question is whether funds received are a gift or a loan.  What are the differences?

The main distinction between a gift and a loan has to do with intent – do you and the lender  intend that the funds you now have are to be repaid.  Ideally, you are the lender will enter in to a written contract at the time the funds are released that sets out a repayment schedule, applicable interest and the consequences of default.

This type of formal contract can be essential to proving that you entered into a loan contract and you should create such a contract even when transacting with family members.

If no contract was entered into at the time of the money transfer, an oral agreement can be formalized later, but such a contract should be drafted by a lawyer to increase the chances that it will pass the scrutiny of a judge.

Judges will look at other transactions between the parties.  If your father has written you 15 checks over the past two years, and there is no contract and you have not paid anything back, it will be difficult to argue on the eve of bankruptcy that these payments are loans and not gifts.

If you have lent or received money and you are uncertain whether these transactions are loans or gifts in the eyes of the law, please contact our office.

The post Gifts vs. Loans – Big Differences in Bankruptcy Court appeared first on Tennessee Bankruptcy Blog.

• surrendering your property and walking away from any associated debt
• redeeming your property by paying the secured creditor the fair market value in one lump sum
• reaffirming your property by re-entering into a contract to pay the installment note
• continuing to pay the note but not signing a reaffirmation

There are pros and cons for each of these options.   In this blog post I want to discuss the good and bad of reaffirming your mortgage debt.

Many lawyers feel very strongly that you should never reaffirm your mortgage.   When you reaffirm, you are obligating yourself personally to pay your mortgage note.   This means that if you should default on this obligation and the value of your home is less than the outstanding balance (a very real possibility in current economic times) you could find yourself facing a deficiency claim in the tens of thousands of dollars.

A better option, according to the anti-reaffirmation argument, is to “stay and pay” – in other words, stay in your home, continue to make regular mortgage payments and continue to build equity.  If you should lose your job or your ability to pay your monthly mortgage obligation, you can simply walk away, since your Chapter 7 discharge will have discharged your personal liability to the mortgage company.

The mortgage company would still have the right to foreclose against your property since your bankruptcy discharge does not cancel the security note linking the property and the mortgage loan.

What is the argument in favor of reaffirmation?

In my view there are three reasons to consider reaffirming a mortgage obligation:

1. when you reaffirm, your timely payments will appear on your credit report and support your credit recovery.  If you do not reaffirm, you have no personal liability to pay the mortgage debt; thus all those payments you make will not positively impact your credit report
2. when you reaffirm, you will have certainty in your relationship with your mortgage company.  While it is true that mortgage companies currently would rather have your money than your property, this may not always be the case.  Technically, your bankruptcy filing constitutes a default of the promissory note associated with your mortgage and, in theory, at some point in the future, your lender could decide to pursue a foreclosure or demand a higher interest reate even if you have been making your payments.
3. technically the Bankruptcy Code does not permit “stay and pay.”   Section 521(a)(2) of the Code requires you to state your intention – surrender, reaffirm or redeem and fulfill that intention before your case is over.   Currently the Bankruptcy Courts are not enforcing this debtor obligation but a compelling Circuit Court or Supreme Court decision addressing this omission could drastically change the bankruptcy landscape.

Under provisions of the Bankruptcy Code, your lawyer is obligated to advise you regarding the pros and cons of reaffirmation.  Your lawyer will correctly be concerned about your capacity to make ongoing payments.  But current financial capacity is only one of the factors to discuss.   Your decision about whether to reaffirm ought to include a consideration of your short and long term financial prospects as well as the importance to you of the positive credit impact arising from reaffirmation.

The post Should You Reaffirm Your Mortgage Loan in Chapter 7? appeared first on Tennessee Bankruptcy Blog.

an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or

any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

Currently student loans would only be dischargeable if the debtor files an expensive “Adversary Proceeding” in bankruptcy court and successfully argues that repayment would present an “undue hardship.”  Statistically a finding of undue hardship has proven to be very, very difficult.

Recently, however, there comes word that Congress is considering a change in this law that would make some private student loans dischargeable.   San Francisco bankruptcy attorneys Jeena Cho and Jeff Curl report on their blog that H.R. 5043 entitled the Private Student Loan Bankruptcy Fairness Act, a bill co-sponsored by Tennessee representative Steve Cohen, is now making its way through Congress.

Why would Congress consider this change?  Perhaps this Congressional action arises from complaints from trade school students who get stuck with thousands and thousands of dollars of student loans, even when the trade school goes out of business or fails to provide the promised education.

As the bill’s sponsors note, private student loans are fundamentally different from government backed student loans.  Lenders issuing government backed loans must adhere to certain requirements – such as clearly disclosed fixed interest rates and limitations on “origination fees.”  Private student loans are not required to have any such limitations and borrowers frequently find themselves paying extremely high fees in exchange for limited benefit.   According to Rep. Cohen, permitting the discharge of private student loans would function as a form of needed consumer protection for borrowers.

The Private Student Loan Bankruptcy Fairness Act is not yet law, but it is encouraging to see Congress consider this legislation.

The post Congress Considers Law to Make Private Student Loans Dischargeable in Bankruptcy appeared first on Tennessee Bankruptcy Blog.

If you have any kind of claim that could produce money or property for you, it’s critical that you tell your bankruptcy attorney all about it.  Here’s why.

Everyone who files bankruptcy is required to file a set of schedules that list all their debts and all their property.  These schedules are filed under penalties of perjury.  Most people try to give accurate information because they want to be honest but also because failure to do so is a federal crime.  Rich and powerful people have gone to federal prison for hiding assets.

The Bankruptcy Code defines “property” very broadly.  It includes much more than obvious things like real estate, cars, jewelry, and bank accounts.  It also includes intangible assets like tax refunds, potential lawsuits, and claims for personal injury, workers compensation, social security, or child support.  So the simple reason you should disclose such claims is to be honest and to comply with the law.

There is also a more complicated but equally powerful reason.  Courts have developed a doctrine called judicial estoppel that can kill your claim if you do not disclose it.

Judicial estoppel is based on every court’s desire to maintain its own integrity.  Judges believe people should not be able to assert one set of facts in one court and completely opposite facts in another.  Because people who file bankruptcy swear that their schedules accurately disclose all their assets, failure to list a claim in effect tells the bankruptcy court that you do not have a claim.  Then, when you try to prosecute the claim in another court, or before an administrative agency, you are saying that you do have a claim – the exact opposite.

With every legal claim, there is someone on the opposite side – a defendant, an insurance company, or an employer – who has every reason to see the claim fail.  Defense lawyers regularly check to see whether claimants have filed bankruptcy and, if so, whether they disclosed their claim.  The defense lawyer will usually succeed in having any undisclosed claim dismissed.  It doesn’t matter how badly the claimant was hurt, how much money or work he has lost, or how deserving he is.  His claim is finished.

One final thing.  Many states have exemptions that protect most if not all of the proceeds of injury claims and the like. This means that you, and not your creditors, get the benefit of these funds.  But many bankruptcy courts will disallow an exemption if the debtor does not promptly disclose the corresponding asset.  So this is one more way that failing to disclose a claim can lead to a bad outcome.

Don’t let this happen to you.  If you have a claim of any kind at all, discuss it fully with your bankruptcy lawyer before you decide to file, whether or not you are asked about it.  And if you do file, make sure it is listed on your schedules.

The post Why You Must Disclose Injury Claims When You File Bankruptcy appeared first on Tennessee Bankruptcy Blog.

Examples of ‘other property’ that can be repossessed include jewelry, furniture, electronics, home appliances, and cash. Here we will focus on your repossessed vehicle, however, which is the most common property repossessed, and how to get it back.

It is very important to act quickly to get your repossessed vehicle back because the law states you must file for bankruptcy within 90 days of the repossession in order to retrieve the vehicle. However, you should act right away – because the creditor can resell your vehicle and it is then extremely difficult to get back.

When you file for bankruptcy, the bankruptcy court can look at any payments and property transfers within the past 90 days and determine if they may hinder the repayment of creditors. Any payments or property transfers within 90 days before you filed for bankruptcy can be seen as a preferential transfer and can be reclaimed. When your vehicle is repossessed, the creditor is acquiring equity on it. Because of this, the vehicle can be seen as a preferential transfer and the creditor can be forced to return the vehicle to you.

Fortunately in this situation the law works in your favor, but the court must still be persuaded that the vehicle is rightfully yours and order the creditor to return it. Your attorney must file a bankruptcy petition and argue that the repossession of your vehicle is a preferential transfer.

If you are in this situation, speak with an experienced attorney to learn more about how to get your repossessed property back. The attorneys here at Clark and Washington have many years’ experience in helping debtors reclaim their repossessed vehicles, so we know how to use the law to your advantage.

The post Getting Your Repossessed Vehicle Back with Bankruptcy appeared first on Tennessee Bankruptcy Blog.

Here are some ways the SCRA protects you from bankruptcy while you are serving in active duty in the military:

• All bankruptcy proceedings are frozen, eviction is prevented, and the court cannot enter into a judgment while members of the military are serving in active duty.
• Actions such as reducing interest rates on loans and debts that accumulated before active duty can be taken to assist the service person.
• If military reasons prevent a service person on active duty from appearing in court, an attorney can be appointed for the service person to protect them against default judgments such as bankruptcy proceedings.
• It is possible for court proceedings to be halted if the defendant is a member of the military and is not able to appear in court.

Even if a court proceeding started before you were serving in the military, the SCRA protections apply to any court proceedings taking place, including bankruptcy, once you begin to serve. Typically 90 days after you have been discharged from the military, SCRA protections end. However, you can be released from an agreement, such as a lease, without any consequences if you were stationed after the agreement was made.

There are several factors that determine SCRA protections and I recommend speaking with an experienced attorney if you are experiencing financial troubles.

The post Bankruptcy and the Military appeared first on Tennessee Bankruptcy Blog.

When you file for Chapter 13 bankruptcy, you will be repaying all or a portion of your debt by making installments to the Chapter 13 Trustee that have been outlined in the payment plan and approved by the bankruptcy court. The Trustee is then responsible for paying the creditors that you owed. Sometimes debtors that have filed for Chapter 13 realize that they are unable to make their plan payments, or cannot make car or mortgage payments once the plan has begun.

If this is the case, as long as your bankruptcy case has not been converted before, it is your legal right to try and convert from a Chapter 13 to a Chapter 7 bankruptcy. Here are several things you will need to do in order to convert to a Chapter 7 bankruptcy.

You will need to take the “Means Test” again, which the court will use to determine if you qualify for Chapter 7 bankruptcy by evaluating your financial information such as your income, debts, and expenses. If you pass the means test you will need to then file a “Notice of Conversion,” which costs a fee, with the bankruptcy court. The Trustee will then be in charge of determining if you are eligible to convert to Chapter 7 bankruptcy.

Because bankruptcy laws are very complex and constantly changing, I recommend speaking with an experienced bankruptcy attorney to assist you through the Chapter 13 to Chapter 7 conversion process.

The post Can I Convert From Chapter 13 Bankruptcy to Chapter 7? appeared first on Tennessee Bankruptcy Blog.