You've heard a lot about bankruptcy, but all 5 of these things are untrue.

You've heard a lot about bankruptcy, but all 5 of these things are untrue.     

1.         An individual must be completely broke to file for bankruptcy.

                        This just isn't true.  The bankruptcy code is written so as to not leave an individual with nothing, because they would then likely become wards of the state.  With that in mind however, there are limits as to how much you can keep.  The best way to know what is exempt, and what is not is to                              contact a bankruptcy attorney in your area.  Other than a few limited exceptions, the only requirement to file for bankruptcy is that an individual cannot pay their bills when they are due.

2.         If I file for bankruptcy I will never be able to get credit again.

                        A bankruptcy filing will appear on a credit report for 10 years which will limit the options for receiving credit, but credit can be rebuilt.  Further, most individuals considering bankruptcy already have poor credit ratings, therefore filing bankruptcy is a good start towards rebuilding their credit.

3.         If I file for bankruptcy I will never be able to buy a house.

                        This is also wrong.  Now the lender may ask for some additional guarantees and it may be more difficult, it is not unheard of.  Like all lenders, mortgage companies weigh the risk of the loan against the reward.  So while interest rates may be a bit higher, or a more sufficient down payment may be required, a mortgage can be obtained once the credit is rebuilt.

4.         I will lose my car if I file for bankruptcy.

                        Yes and no.  While it all depends on the amount of equity one holds and the exemptions available in their case, many debtors are able to retain their vehicles.  In order to be certain about the car, one should consider obtaining a consultation with an attorney who specializes in bankruptcy law.

5.         If I file for bankruptcy I will lose my job.

                        This is not true.  The law is very clear that an employer may not terminate an employee solely because they filed for bankruptcy.  If an individual were able to prove that the filing of bankruptcy were the sole reason for termination of employment, that person would be able to file a lawsuit against the employer.  However, a potential employer can use the filing of  bankruptcy as a factor to consider whether to employ someone, it just cannot be the sole factor.

            So now that you know all five of these things that you have heard about bankruptcy aren't true, what is?  The best way to find out is to contact a bankruptcy attorney in your area and ask for a consultation.  They will be able to explain to you the truths about bankruptcy, the process of bankruptcy, and whether or not bankruptcy is a good option for your situation.  

So you filed Bankruptcy, Now What? 10 Steps towards rebuilding your Credit.

So you filed Bankruptcy, Now What?  10 Steps towards rebuilding your Credit.

The filing of a bankruptcy is not a life sentence.  There are numerous steps that can be taken to rebuild the credit that was once destroyed.  Below you will find some steps that can help rebuild a credit score after a bankruptcy and some useful tips.

1.         Open a Checking and Savings Account

                        If you do not already have a checking and savings account, you should consider opening them.  Some things to consider when trying to decide where to bank are locations available, interest rates and fees, and the various services the bank provides.  A good way to determine if a bank would be a good fit for you is   to ask friends and family about their experiences with various different financial institutions.

2.         Get a Secured Credit Card

                        As soon as you have some money saved away in your new savings account, you can put some of it towards a secured credit card.  A secured credit card is similar to a debit card in that you have paid the money to the bank prior to using the card, however your payments should be reported to the major credit bureaus.  Although a secured credit card is a good way to start improving your credit score, be cautious as to what fees are associated with the card.

3.         Try to apply for a Retail or Gas Credit Card

                        Some keys to remember for this aspect of rebuilding your credit are to get the card to a location you will not be tempted to splurge and possibly spend beyond your means.  That is why a gas card is a good idea.  It is a necessary expense and the only way to splurge on it is to purchase gas for other people.

4.         Pay off your balance every month.

                        Once you have a credit card it is essential that you pay off the balance as often as possible.  This is because credit companies want to see that you are capable of paying off the balances you carry.  Remember, you are doing all of this to show them that you are responsible with your money. 

5.         Pay your bills on Time.

                        One of the quickest ways to build your credit is to consistently pay your bills on or before their due dates.  To help with this draw up a calendar showing when different bills are due, and send the payments at least a couple of days in advance.

6.         Check your credit reports and Dispute any incorrect information.

                        The credit bureaus are required to give you one free credit report per year.  Take advantage of this to make sure that the information they are providing is accurate.  Check the credit reports to make sure that any discharged debt is not still being reported and to make sure that all of the debt that is reported is accurate.  You have the right to dispute those reports.

7.         Build a savings.

                        Throwing a little money aside to savings every month will help you build a cushion for those emergencies such as car repair.  If you already have the money set aside, you will not need to rely on credit to help get through those times. 

8.         Create a Budget

                        When you filed your bankruptcy you had to fill out a budget showing where your money was going.  Take a long hard look at that budget.  Adjust where you can and stick to it as much as possible.

9.         Avoid Finance Companies

                        These companies exist to turn a profit.  If you take the steps above you can avoid being stuck in long term deals at high interest rates.  Instead, focus on building up your savings and increasing the limit on the few lines of credit you do have.

10.       Ask when you can upgrade your secured line of credit to an unsecured line.

                        You have recently filed a bankruptcy.  The bank is not going to be in a hurry to take a look at your more recent history and give you an unsecured line of credit.  By asking you could possibly obtain this sooner and the worst outcome is that they say no.

Remember, by taking the steps listed above you can rebuild your credit and get that fresh start you were seeking when you filed bankruptcy.  If you are considering filing bankruptcy, it is always good to contact a bankruptcy attorney in your area for a consultation to determine if bankruptcy is a good option in your situation.  

Can I file Chapter 7 Bankruptcy on unemployment insurance over payments?

In today's tough economy many individuals find themselves in a position where they are reliant on unemployment insurance to get by.  With that in mind, it is understandable why there are so many instances of unemployment insurance over payments.  The bankruptcy code treats an unemployment insurance over payment just as they do any other legal debt.  This means that unemployment insurance over payments do qualify for a discharge so long as they were not the result of fraud, and you are not still receiving unemployment benefits.

If you are still receiving unemployment insurance benefits, they are allowed to take the over payment through a "recoupment action."  This means that the over payment can be withheld from your current benefits or any future benefits.  Recoupment actions are not subject to the protection of the automatic stay in bankruptcy, and therefore need not stop upon filing nor get permission from the court after filing.  Usually, the automatic stay would prevent a creditor from taking any action on the debts. 

Fraud is a different story all together.  If the over payment was a result of fraud, which is a result of an intent to deceive, the bankruptcy court will not discharge the debt.  An example of this would be if an individual were to apply for unemployment insurance benefits after gaining employment.  This would also be an example of a crime.  In these instances the state may seek a criminal conviction resulting not only in repayment of the unemployment insurance over payment  but also possible fines and jail time depending on the circumstances.

Let us apply this to some hypothetical situations.  J. Doe has been filing for unemployment and receiving $500.00 per week for the past 6 weeks when it is discovered that he:

            a: was only entitled to receive $400.00 per week due to a clerical error in his local unemployment office, and is still filing;

            b:  he had procured full time employment and started in week three but continued to file;

and

            c: was only entitled to receive $400.00 per week due to a clerical error but had quit filing for unemployment as he procured full time employment that started in week 7. 

In Scenario A: J. Doe would owe $600.00 in unemployment insurance over payment that would be dischargeable in Chapter 7 Bankruptcy, but since he is still receiving the benefits, this amount would be withheld from his future benefits through the "recoupment action."  In scenario B, J. Doe would have committed a fraud by intentionally filing for the benefits even though he was no longer entitled to them and therefore they would not be dischargeable and he may be facing a criminal action.  In scenario C, the unemployment insurance over payment would be a dischargeable debt in a Chapter 7 filing.

Since every case is unique, and the above examples are simply generalizations, it is always best to contact a bankruptcy attorney to discuss the intricacies of your individual case.  

Definitions of Common Bankruptcy Terms According to The United States Bankruptcy Code

Bankruptcy Assistance:  any goods or services sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors' meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect to a case or proceeding under this title.

Claim:  right to a payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured, or unsecured

Consumer Debt:  debt incurred by an individual primarily for a personal, family, or household purpose.

Creditor:  entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor

Current Monthly Income:  the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive) without regard to whether such income is taxable income

Debt:  liability on a claim

Debtor:  person or municipality concerning which a case under this title has been commenced

Debtor's Principal Residence:  a residential structure, including incidental property, without regard to whether that structure is attached to real property and includes an individual condominium or cooperative unit, a mobile or manufactured home or trailer.

Domestic Support Obligation:  a debt that accrues before, on , or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title that is owed to or recoverable by a spouse, former spouse, or child of the debtor or such child's parent, legal guardian, or responsible relative; or a governmental unit.

Entity:  Includes person, estate, trust, governmental unit and United States Trustee

Individual with Regular Income:  individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title, other than a stockbroker or a commodity broker

Insolvent:  with reference to an entity other than a partnership and a municipality, financial condition such that the sum of such entity's debts is greater than all of such entity's property at a fair valuation

Judicial Lien:  lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding

Lien:  charge against or interest in property to secure payment of a debt or performance of an obligation           

Unexempt Property in a Chapter 7

Upon filing a Chapter 7, all of the debtor's property becomes part of the bankruptcy estate.  However, there are certain exemptions available that exclude property from the bankruptcy estate and protect it from unsecured creditors.  The reason for such exemptions is to allow debtors to obtain a "fresh start" while still maintaining necessary possessions, such as their house, car, clothing and personal property.  Depending on the state, exemptions are based upon either state or federal statute.  In a Chapter 7, the trustee's job is to administer the bankruptcy estate and see if there are any unexempt assets which can be distributed to creditors.  If there is property in the bankruptcy estate that is not covered by one of these exemptions, the trustee may collect this property or the value of the property.  Typically, the trustee will ask the debtor to pay into the estate the amount of unexempt equity in the property.  This payment can often be broken down into smaller installment payments until the amount of unexempt equity is paid in full.  In instances where the trustee collects the property itself, he or she must liquidate it, or turn it into cash.  The trustee can do this by selling the property either at a private sale or a public auction. 

               When the trustee discovers there are unexempt assets in a Chapter 7 case, he or she sends out a notice of assets to the creditors involved in the bankruptcy.  Creditors file what are known as a "proof of claim."  As long as the trustee does not object to the proof of claim, the proof of claim is allowed.  The trustee will object to the proof of claim if it does not contain the necessary or correct documentation and information.  The trustee will also object to the proof of claim if it is filed after the deadline to file a proof of claim, which is set forth at the commencement of the case.  The trustee will disburse the money he or she has recovered from the unexempt assets to the creditors based upon the claims filed.  If a creditor does not file a proof of claim they will not receive any disbursement from the trustee.  After the trustee has made the disbursements of assets to the creditors he or she will file a final report and accounting.  This means that the estate has been administered and the case will be concluded.

What to Expect at My Chapter 7 Meeting of Creditors

The meeting of creditors is also known as the section 341 meeting (section 341 refers to a particular section in the bankruptcy code).  The meeting of creditors gives the trustee and the debtor's creditors an opportunity to interview the debtor and examine the debtor's petition, statements and schedules initially filed with the court.  Although, this meeting is called "the meeting of creditors," creditors very rarely show up at these meetings.  The trustee does not have the power to resolve disputes between creditors and debtors, this authority is left up to the bankruptcy judges.  If a creditor does show up, it is typically to aid in the process of discovery.  The bankruptcy judge is not allowed to attend the meeting of creditors, so that he or she is not biased by any information presented at this meeting. 

               Typically your meeting of creditors will consist of you, your attorney and your trustee.  Although there will be other debtors on the docket, you will meet with your trustee individually.  At the beginning of the meeting the trustee will inform all of the debtors about the consequences of receiving a discharge under Chapter 7.  This will be done either verbally or in writing.  There are a few things you will need to provide the trustee before the meeting of creditors.  These documents include: 60 days worth of pay stubs, your most recently filed tax returns, copies of bank statements reflecting the amount in your account on the date that the petition was filed, or an affidavit stating that said documents do not exist.  On the day of the meeting of creditors, you will have to provide the trustee with proof of your social security number and a government issued picture id.  It is preferable that you bring your social security card and your driver's license. 

               Some common questions trustees will ask include:

-Did you sign the petition, schedules, statements and related documents and is the signature your own?

-Did you read the petition, schedules, statements and related documents before signing them?

-Are all of your assets identified on the schedules?

-Have you listed all of you creditors on the schedules?

-Have you ever filed bankruptcy before?

-What is the address of your current employer?

-Do you have a domestic support obligation?

               The actual meeting with the trustee does not take very long at all, and as long as you are honest with your attorney and your trustee you have nothing to worry about!

The Bankruptcy Court

The bankruptcy court is part of the federal district court in each judicial district.  Bankruptcy judges are appointed for fourteen year terms.  The statutes applicable to federal district courts and The Federal Rules of Evidence are often used in bankruptcy courts.  All cases with issues addressed in Title 11 of the United States Code are at first referred from the district court to the bankruptcy court.  This does not mean that these cases have to stay in the bankruptcy court; they just have to start there if the case deals with issues under Title 11 (The Bankruptcy Code).  The bankruptcy court can also hold jury trials and has the powers of a court of equity, law and admiralty.  Appeals from the bankruptcy court can go to the district court of the Bankruptcy Appellate Panel Service (BAPS), if one has been established in that district.  BAPS consist of three bankruptcy judges.  Cases may go up to the BAPS if all of the parties agree to this and the majority of the district judges agree to refer appeals to the BAPS for that district.  Although uncommon, there are cases when appeals can go straight from the bankruptcy court to the court of appeals.  The procedure for appealing in bankruptcy cases is laid out in the Federal Rules of Bankruptcy Procedure, similar to the Federal Rules of Appellate Procedure.

Saint Louis is located in the Eastern District of Missouri.  The bankruptcy judges for the Eastern District of Missouri are Chief Judge Barry S. Schermer, Judge Kathy Surratt-States and Charles E. Rendlen, III.  The Eastern District of Missouri has three divisions:  the Eastern division (which includes Saint Louis and outlying areas), the Northern Division and the Southeastern Division.  The bankruptcy court for the Eastern Division of the Eastern District of Missouri is located in the Thomas F. Eagleton U. S. Courthouse at 111 South 10^th Street, Saint Louis, MO 63102.  The bankruptcy court for the Northern Division of the Eastern District of Missouri is located in the Hannibal Federal Building at 801 Broadway, Hannibal, MO 63401.  Note, the Hannibal office is not staffed unless court is being held.  The bankruptcy court for the Southeastern Division of the Eastern District of Missouri is located in the Rush Hudson Limbaugh Sr. U. S. Courthouse at 555 Independence Street, Cape Girardeau, MO 63703.  Directions and contact information for each of these locations is available at www.moed.uscourts.gov.