Tag Archives: Debtors

DALLAS BANKRUPTCY: NON-DISCHARGEABLE DEBTS

by

Leave a comment

Dallas Bankruptcy: Bankruptcy is a great way to get rid of debt.  But there are some debts that cannot be discharged in bankruptcy.  The non-dischargeable debts bankruptcy attorneys generally talk about are taxes, student loans, and domestic support obligations.  These are the most common types of non-dischargable debts, and at least one of the three is found in a large percentage of bankruptcy cases filed.

 

However, these are not the only non-dischargeable debts.  There are several other categories that are much more interesting than taxes and student loans.  The Bankruptcy Code also prevents discharge of debts owed as the result of certain types of wrongdoings.  These include:

 

1.         Criminal Fines.  Fines for violating the law are non-dischargeable.  For example, if you owe court-ordered criminal restitution, have been fined for contempt, or have speeding tickets, these debts will not be discharged in bankruptcy.

 

2.         Fraud.  If you incurred debt through fraud, such as lying on an application in order obtain credit, your debt may be found to be non-dischargeable.

 

3.         Operating a Motor Vehicle While Intoxicated.  Debts for personal injury or death caused by the debtor while driving a vehicle while intoxicated are not dischargeable in bankruptcy.

 

Fortunately, I very rarely file cases in which debtors owe these types of debts.  I would expect that traffic citations would be a common debt included in bankruptcy schedules, but that is not the case.  I guess I have very well-behaved clients.

TEXAS BANKRUPTCY: DEBTORS PROTECTED AGAINST DISCRIMINATION

by

Leave a comment

Can my employer fire me for filing bankruptcy?

 

The Bankruptcy Code expressly prohibits private employers from firing you because you filed for bankruptcy.  See 11 U.S.C. § 525(b).  This prohibition even protects debtors who discharged debts owed to their employer.  For example, a bank teller cannot be fired for discharging credit card debt owed to the bank in which they work.

 

Can my license be suspended because I filed bankruptcy?

 

The Bankruptcy Code states that the government cannot “deny, revoke, suspend, or refuse to renew a license” to a person who has filed bankruptcy.  See 11 U.S.C. § 525(a).  This protection isn’t limited to driver’s licenses, but also extends to protect debtors with licenses needed for employment, such as real estate licenses, medical licenses, and law licenses.

BANKRUPTCY: SCHWAB V. RILEY – WHAT EXACTLY ARE WE EXEMPTING?

by

Leave a comment

Bankruptcy law doesn’t seem to get much attention from the Supreme Court.  So on June 17, 2010 when the Supreme Court decided Schwab v. Reilly, bankruptcy attorneys, judges, and trustees paid close attention to the Court’s holding, which explained what debtors are protecting when they claim an exemption in bankruptcy. 130 S.Ct. 2652 (2010).  In Schwab, the debtor exempted kitchen equipment valued at $10,718.00.  The trustee was aware that the equipment had been appraised for $17,200.00 but did not file an objection to the debtor’s exemptions before the deadline to do so passed.  After the deadline, the trustee moved the bankruptcy court for permission to auction the equipment so he could acquire the excess value for the bankruptcy estate.  The bankruptcy court denied the trustee’s motion to auction the equipment.  This decision was affirmed by both the district court and the court of appeals.

 

The Supreme Court reversed the lower courts’ decisions, holding that “in cases such as this, an interested party need not object to an exemption claimed in this manner in order to preserve the estate’s ability to recover value in the asset beyond the dollar value the debtor expressly declared exempt.”  Id. at 2659.  The Court explained that when choosing exemptions, the debtor is not exempting the property but rather is exempting the debtor’s interest in the property.  The debtor in Schwab did not exempt her kitchen equipment.  She exempted a $10,718.00 interest in the equipment.  The additional value of the property was nonexempt and could be realized for the bankruptcy estate.  Since the Trustee did not object to the exemption, whether or not the deadline to object to exemptions had passed was irrelevant.

THE BANKRUPTCY ESTATE

by

Leave a comment

When a debtor files bankruptcy, an estate is created.  The estate includes all of the person’s legal and equitable interests in property at the commencement of the case, and may also include any property the debtor becomes entitled to during the 180 day period following the filing of the bankruptcy case.  However, debtors can exempt property from being included in the bankruptcy estate.  Each state has its own set of exemption.  Federal statutes provide another set of exemptions that can be used in some states.  Debtors in Texas are allowed to use both the Federal and Texas exemptions when filing bankruptcy.

 

Property that has not been exempted using these statutes is referred to as being “nonexempt” property.  The existence of nonexempt property affects bankruptcy cases in different ways, depending on which chapter of bankruptcy is filed and in which jurisdiction.  In Chapter 7 bankruptcy cases, nonexempt property is liquidated and the proceeds paid to the creditors.  Debtors are allowed to keep any property that is protected by an exemption.  In Chapter 13 bankruptcy cases, debtors have to pay the value of their nonexempt property to a trustee to be disbursed to unsecured creditors, but the trustee does not liquidate this property.  The property remains a part of the bankruptcy estate until the debtor’s Chapter 13 plan is confirmed, at which point the property vests back in the debtor unless otherwise stated in the plan or the confirmation order.  In some jurisdictions, the property stays a part of the bankruptcy estate even after confirmation of the plan.  In these jurisdictions, debtors are required to seek an order of the court whenever they intend to sell, transfer, or otherwise dispose of their property.

WAITING TO FILE CHAPTER 13 BANKRUPTCY COULD COST YOU!

by

Leave a comment

Most of the time, when a client comes into my office to talk about filing bankruptcy, they have urgency to file.  We can usually point to a single event that has caused them to seek out legal advice.  Perhaps they received notice of a foreclosure sale, their car has been repossessed, or creditors are hounding them.  Whatever the reason may be, people usually don’t meet with a bankruptcy attorney unless something has motivated them to seek out help.

 

Every once in a while someone will come into my office to talk about bankruptcy, and they do not have a feeling of urgency.  People with high incomes tend to wait the longest to make a decision to file bankruptcy, and this delay can be very costly.  Debtors in Chapter 13 bankruptcy repay somewhere between 0% and 100% of their unsecured debt.  How much they have to pay to unsecured creditors usually depends on how much they earn.  The more a person earns, the more they have to pay back.  Debtors with large incomes often have to pay back 100% of their debt.  So you may be asking yourself, why should someone who has a high income and will have to pay back all of their debt, be in a hurry to file bankruptcy?  Because the longer a high income debtor waits to file bankruptcy, the more they will eventually pay.  Debts grow due to interest, fees, and costs of collection activities.  For example, a credit card with a balance of $100,000 earning 30% interest will double in approximately two and a half years.  If a high income debtor with $100,000 in credit card debt files bankruptcy today, they may have to pay back $100,000 to their unsecured creditors, but if they wait two and half years they may have to pay back $200,000.  For high income debtors, waiting to file bankruptcy can cost tens of thousands of dollars.