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Haines & Krieger LLC, Attorneys, Las Vegas, NV

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What if I Owe My Bank Money?

February 3rd, 2012

Filing bankruptcy does not stop your finances. You still need money for gas, food, to pay the rent, etc. But what if you have money in your checking or savings account at a bank where you owe money? This can be a problem once you file your bankruptcy case.

What the Bank Can Do

If you have a debt at a bank where you have money deposited, the bank has a right of setoff. That means it can take money from your checking or savings account to pay a debt, like an overdraft or a defaulted loan. When you file bankruptcy, the bank’s right to setoff survives, but is temporarily prevented by the automatic stay. Before the bank can perform the setoff it must ask permission from the bankruptcy court.

You would think that the bankruptcy automatic stay would stop the bank from taking collection action against you, but that is wrong. The 1995 US Supreme Court case of Citizens Bank of Maryland v. Strumpf, 516 US 16 (1995) says that a bank can freeze your account and withhold your funds so that it has time to make a request for setoff from the bankruptcy court. Once your account is frozen for setoff purposes, the money is likely gone for good.

How Long Do You Have?

When you file bankruptcy the clerk of the court sends a notice to the bank regarding your bankruptcy case. It usually takes a few days for the bank to receive notice. However, some larger banks compare the list of recent bankruptcy filings against their accounts. If an account holder has filed bankruptcy, some banks will freeze the account immediately, whether you owe it money or not (Wells Fargo Bank often does this).

What You Can Do

The answer is simple. If you owe money to your bank, switch banks. Keep the old bank account open, but only keep a small balance. Remember to change any direct deposit to the new bank account and cancel any monthly direct debits. Your old bank cannot setoff money that is deposited in another bank, and cannot freeze that account.

Filing bankruptcy is complicated. Thankfully there are experienced attorneys that can identify your debt issues and are able to use the federal and state laws to protect your interests. If you need help with your finances, speak with an experienced bankruptcy attorney and discuss your situation. The federal bankruptcy code can help you discharge debt, restructure your finances, and get a fresh start.

For a free Las Vegas bankruptcy consultation, call Haines & Krieger at 1-800-LAWYERS.

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Chapter 13 Wage Deduction

February 1st, 2012

The Chapter 13 bankruptcy trustee encourages debtors to make monthly plan payments using a wage deduction order. At the debtor’s request, the bankruptcy court will send an order to the employer to withhold money from the employee’s paycheck and send it to the trustee. Cases using wage deduction have fewer instances of default

Many debtors don’t use wage deduction because they want to avoid informing their employer about the bankruptcy case. But does this make sense?

Bad credit can get you fired. Failure to manage your personal finances could lead to your termination, especially if you work for a bank and other financial institution, a retail store, or a business where you handle cash on a routine basis. Collection calls at work can get you fired. Mistakes and time off work can get you fired.

On the other hand, the federal bankruptcy laws prohibit government and private employers from firing you on the basis of your bankruptcy filing. By informing your employer that you have filed bankruptcy, you have put the employer on notice that you are dealing with your financial problems in a responsible and legal manner. In order to terminate you during your bankruptcy case, your employer must find a reason unrelated to your bankruptcy and personal finances. Consequently, most employers do not want to risk violating the federal law.

Finally, which is worse: to inform your employer of your bankruptcy through a wage deduction order, or for your employer to discover your financial problems through some other channel? Most employers (and people) respect honestly and forthrightness. Some employers conduct periodic credit checks on their employees, so your bankruptcy will be eventually discovered. This is especially the case with government work involving national security or the Federal Deposit Insurance Corporation.

Of course, every situation is different and you should discuss your situation with an experienced bankruptcy attorney. Your attorney can help you decide if a wage deduction order is right for you

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6 Points about What Happens to Recovered Business Assets in a Personal Bankruptcy

January 31st, 2012

Some, but not all Las Vegas bankruptcy cases involve ownership of small businesses. The business fails, files Chapter 7, and the owners of the business file Chapter 7 bankruptcies as well. These types of situations are usually significantly more complex than the common consumer bankruptcy. One thing that can happen is the bankruptcy Trustee can elect to abandon some of the business’ accounts receivable. Obviously, the business’ owners can still collect that revenue, but since they’re in bankruptcy too, what happens next?  Six things:

  1. The debt to the corporation becomes an asset to its owners. Moreover, contrary to what one might expect, bankruptcy doesn’t automatically dissolve businesses, they can be going concerns after bankruptcy if the owners elect to maintain them.
  2. If the corporation manages to collect on the debt, the owners can distribute the proceeds among themselves, even though they are in bankruptcy personally.
  3. What happens to the money depends on where the owners are in their own bankruptcies. If they are about to file in Chapter 7, the income will count towards the means test, and it may throw them above the median state income, requiring them to file in Chapter 13.
  4. If the owner has already filed and receives the income, it’s treated as a windfall, much like inheriting an estate from a deceased relative or winning the lottery. When this happens, the owner-petitioner must notify the bankruptcy court if the windfall occurred within 180 days of the initial filing.
  5. Unless the petitioner can claim an exemption, the Trustee will add the business’ recovered debt to the petitioner’s bankruptcy estate. The Trustee will then distribute it to the creditors. There is a small chance that the petitioner will be able to keep some of it if there’s anything left over.
  6. If the windfall occurred after 180 days of the filing, it will not be included in the bankruptcy estate

These types of situations don’t occur often, but as with all business bankruptcy situations—especially those that involve the owners’ filing as well—an experienced bankruptcy attorney is necessary to navigate the pitfalls, as well as the potential benefits.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation by calling us at 1-800-LAWYERS.

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Should I Tell My Creditors That I’m Filing Bankruptcy?

January 30th, 2012

Creditor harassment is a common reason people visit bankruptcy attorneys. Collection calls can be a source of frustration and embarrassment. So once you have decided to file bankruptcy, should you tell your creditors?

The answer to this question depends on a number of things. First, have you hired an attorney?  Once you retain bankruptcy counsel, you can inform your creditors, “Don’t talk to me; call my attorney!” The Fair Debt Collections Practices Act (FDCPA) prohibits third party collectors (collection agencies, attorneys, etc.) from speaking with you once they know you are represented by an attorney concerning the debt. Hiring a bankruptcy attorney can provide immediate relief and peace of mind to many who have been harassed by creditors. Ignoring the FDCPA and continuing to harass you can cause serious trouble for the collector.

The second issue is, “Can telling the creditor that you are filing harm you?” Hiring an attorney and intending to file bankruptcy are not the same as actually filing your bankruptcy case. Until you file you are not under federal bankruptcy protection, and a secured creditor may try to repossess property. For instance, if you are several payments behind on your car loan, the lender may decide to quickly repossess your vehicle to avoid complication and delay by the bankruptcy. You may get your vehicle back after you file a Chapter 13 case, but it may take a few days or longer. You will not get your vehicle returned if you file Chapter 7. Once you file your bankruptcy case, the creditor may not repossess property without the bankruptcy court’s permission.

Finally, creditors hear “I’m filing bankruptcy” every day. Are you able to file your case quickly, or will it take awhile? An original creditor (i.e. the one who loaned you money or extended credit) is not subject to the FDCPA. If you do not follow through quickly with your threat to file bankruptcy, the creditor may soon renew and increase its efforts.

Your bankruptcy attorney is in the best position to instruct you whether to tell your creditors that you intend to file bankruptcy. For many, the answer is “Yes,” but there are special circumstances when it is best to avoid disclosing a pending bankruptcy action. Consult with your attorney and get the advice you need. For a free consultation, contact Haines & Krieger at 1-800-LAWYERS.

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6 Ways Identity Theft Connects to Bankruptcy in Las Vegas

January 29th, 2012

People considering filing a Las Vegas bankruptcy might not realize that there are two unusual topics that connect with bankruptcy. One is scams, particularly those related to consumer debt settlement. The other topic is identity theft. At first blush, one might not see the connection, but it’s actually quite clear. The rise in computerized information makes it very convenient for people to conduct their affairs, but it also makes impersonating them easy too. Thus, the law is expanding conceptual terms, such as, “personally identifiable information,” “private information,” “confidential information.” Although protecting these types of information is an important issue, here are six ways identity theft connects with bankruptcy.

  1. Theft of credit information. The thief steals your credit card, or debit card and PIN, and then goes on a spending spree. Usually, you can disavow credit card charges but not debit card ones. If you can’t cancel charges or resolve issues with your bank, you may be forced to file bankruptcy.
  2. Theft of Social Security information. When someone becomes a citizen (even at birth), the government assigns him or her a Social Security number and sends a card in the mail. Do not carry this card on your person. Because many lenders require people to provide their Social Security numbers, it’s not too hard to obtain the name and address that accompany a number and then use it to fraudulently take out loans. This too can force someone into bankruptcy.
  3. Unauthorized payday lending. Payday loans are dangerous due to their high interest rates. Internet-based payday lenders, though, can be worse. Some people have reported that after they applied to a payday lending service on-line, the lender deposited money in their accounts, claimed it was an authorized loan, and then demanded payment plus interest. While this might not be identity theft in the strictest sense, the hallmarks are similar, and the borrower can end up filing bankruptcy.
  4. Theft due to creditors’ mismanagement of records. This can be deeply frustrating because it’s caused by the creditor’s incompetence and can’t really be avoided by debtors. If a creditor’s security protocols are easily compromised, that can lead debtors into bankruptcy, or worse, a creditor might disclose debtors’ confidential information while they’re in bankruptcy, leading to subsequent identity theft.
  5. Theft of medical records. Medical offices often don’t check patient’s identities, making it easy for thieves to fraudulently claim they are someone else to obtain medical treatment.
  6. Fraudulent bankruptcy. Sometimes people will file bankruptcy in someone else’s name. Even if the case is dismissed, it will still appear on a person’s credit report, and bankruptcy judge’s are unsure if they can expunge the records.

Identity theft can ruin people’s access to credit and create all kinds of hassles before it’s corrected. If you believe you are the victim of identity theft, speak with an attorney immediately.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation by calling 1-800-LAWYERS.

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What is an Adversary Complaint?

January 28th, 2012

Federal laws protect an individual from creditor harassment during a bankruptcy case. Sometimes disputes arise during the case and a creditor, the trustee, or the bankruptcy debtor needs the issue tried by a court. In these cases the matter can be heard as an adversary proceeding before the bankruptcy judge.

An adversary proceeding is a separate court case, but is heard by the bankruptcy court when it has jurisdiction over the matter. The jurisdiction of bankruptcy court judges is limited to core proceedings or matters “related to” the bankruptcy. Matters that are not directly related to the bankruptcy case are outside the court’s jurisdiction. For instance, many family law matters, like modifying child support or granting a divorce, cannot be heard as adversary proceedings. Common disputes that are adversary proceedings are:

  • Cases involving the return of money or property;
  • A case to determine the validity, priority or extent of a lien;
  • An objection to discharge or an action to revoke discharge;
  • The attempt to revoke an order of confirmation of a Chapter 13 bankruptcy plan;
  • A case to decide whether a debt is eligible for discharge; or
  • A request for an injunction.

Not all disputed matters related to the bankruptcy case are filed as adversary proceedings. The bankruptcy rules distinguish adversary proceedings from “contested matters.” A note to the Federal Rules of Bankruptcy Procedure states, “Whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter.” An objection to a proof of claim is an example of a contested matter that is not an adversary proceeding.

To commence an adversary proceeding, a party must file an adversary complaint with the bankruptcy court. In cases alleging fraud or debts caused by willful and malicious injury, the bankruptcy law requires that the complaint must be filed within 60 days after the first Meeting of Creditors. The court will issue a summons and schedule a trial date. The trial is held with testimony and exhibits offered as evidence.

An adversary proceeding does not postpone the debtor’s discharge. However, discharge of the debt at issue is delayed until the adversary proceeding is resolved.

If you need to restructure your debts in bankruptcy, but also need a court to decide a matter concerning one of your debts, an adversary proceeding in bankruptcy may be beneficial. Adversary proceedings are conducted quickly and efficiently, so the matter will be fairly tried by a federal judge without a lengthy delay. Speak with an experienced bankruptcy attorney about your financial situation and learn how an adversary proceeding can help. Call us at 1-800-LAWYERS.

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The 5 Components of a Credit Score

January 27th, 2012

Since the housing bubble burst, people are more concerned about their credit score than ever. Higher scores are better, and the Internet is filled with advice for how to improve the number ever closer to 850. It’s unusual for people to ask about the credit score’s origin and more importantly, how its components are calculated. Here’s a brief explanation.

When people talk about their “credit score,” they’re referring to their “FICO score.” FICO scores are proprietary information created by the Minneapolis, Minnesota-based company, FICO (Fair Isaac Corporation). Contrary to intuition, the company’s name is based on the name of its founders, Bill Fair and Earl Isaac, so the “Fair” has nothing to do with fairness. FICO scores range from 300 to 850, but they don’t fall on a bell curve with 575 as the media; rather, the curve skews towards 300, so few people have very high credit scores while more people have low credit scores.

Although FICO’s formula is a closely guarded trade secret, people do know some things about the score’s compositions:

(1)  Payment history (35 percent): Late payments reduce credit scores; on-time payments maintain and improve them.

(2)  Credit capacity used (30 percent): FICO essentially divides people’s revolving debt (credit cards) by their total available credit (the borrowing limit on a credit card). The lower the ratio, the higher the credit score. Because credit capacity used is a ratio, decreasing the numerator (the amount of credit) or increasing the denominator (total available credit) both improve one’s credit score. Oddly, closing an account will lower a person’s credit score.

(3)  Length of credit history (15 percent): having credit for a longer period of time will increase one’s credit score.

(4)  Types of credit (10 percent): Paying down a few different types of loans, whether they’re credit cards, mortgages, student loans, cars, etc., can increase the credit score.

(5)  Past credit applications or searches (10 percent): FICO considers multiple inquiries about a person’s credit worthiness over a short period as detrimental to his or her score. This is more true for credit card applications than auto loan or mortgage applications. Employer searches and individuals checking their own credit will not reduce their scores.

Knowing the components of a FICO score can help people understand why they have low credit and what measures they can take to improve it. Those who have excessive credit card debt should not worry about their credit score as much as their financial bottom line. In those circumstances, filing a Chapter 7 bankruptcy might be a good idea.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at -800-LAWYERS to set up a free consultation.

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7 Reasons to for Student Debtors to Consider Chapter 13 in Las Vegas

January 25th, 2012

The point is repeated endlessly to those considering a Las Vegas bankruptcy: student debt is not dischargeable. It’s a real blow. People’s student debt loads can run very high, and it’s astonishing that lenders, especially including the federal government, will allow people to borrow so much money. That doesn’t mean bankruptcy will do no good for student debtors. Filing a Las Vegas bankruptcy gives people breathing room and discharges other debts like credit card debt. What many people do not realize, however, is that filing a Chapter 13 bankruptcy might do them more good.

Chapter 13 is the “reorganization” chapter, which means the petitioner makes payments to the bankruptcy Trustee over a 3-5-year period, and the Trustee then distributes the payments to the creditors according to their priority in the bankruptcy code. Secured debts and “priority” unsecured debts (missed child support payments, tax debts, and others) are paid first, and anything left over goes to unsecured creditors (e.g. credit card debt and student debt). These debts are then discharged. Student loans are not secured, not prioritized, and nondischargeable, meaning the interest on them will grow during the payment period and they’ll be intact after exiting Chapter 13. Nevertheless, there are seven reasons to consider using Chapter 13 to handle student loan debt:

(1)  As with Chapter 7, the debtor still doesn’t owe anything to unsecured creditors, meaning there’s more money at the end of the month to pay the student loans.

(2)  Filing Chapter 13 also benefits people because they can strip second mortgages on homes and cram down payments on car loans.

(3)  If private student loan lenders refuse to cooperate with debtors, filing Chapter 13 gives them time, which can be beneficial for those who are in school and about to enter lucrative fields, those who might be able to find a new job in the future, those who might be waiting on an inheritance, and those who need time to reduce their living expenses and save up money through other means.

(4)  Chapter 13 affords debtors a longer automatic stay, so those whose loans are near default or are in default will be free of the hassle from creditors.

(5)  Because the payments are distributed to the unsecured creditors at the end of the repayment plan, if the other creditors receive anything, the student lenders will as well. This can offset accumulated interest and possibly dent the loan’s principal.

(6)  After completing a Chapter 7 bankruptcy, people cannot file in any chapter for four years and Chapter 7 for another eight. Chapter 13 has no time bar, so debtors can remain in Chapter 13 continuously. This can allow people to make their payments based on their incomes and not on what creditors want them to pay. It’s possible to pay down the entire loan while in Chapter 13. While this will destroy debtors’ creditworthiness, it will keep the creditors from engaging in collection efforts.

(7)  Sometimes creditors will not object to the dischargeability of a student loan in Chapter 13. If this is the case, they will accept their payout under the repayment plan and you might be debt free.

Student loans are a severe hardship for debtors, but consulting with a Las Vegas bankruptcy lawyer might help make a difference.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation by calling us at 1-800-LAWYERS.

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Will I Lose My Anticipated Income Tax Refund In Chapter 13 Bankruptcy?

January 24th, 2012

Chapter 13 is a repayment bankruptcy. You pay your creditors whatever you can afford over three to five years (three years for lower income earners, five years for higher wage earners). You are required to commit your disposable income to the repayment plan during the repayment period. You are also required to pay as much to unsecured creditors as they would receive in a Chapter 7 liquidation bankruptcy.

An expected income tax refund is property of the bankruptcy estate. Many debtors are able to protect all or a portion of their income tax refunds by applying legal exemptions to the expected refund. After applying all of your available exemptions, the remaining unprotected amount is often little or nothing.

If you cannot protect your tax refund with exemptions, you are required to pay the non-exempt amount in your monthly plan payments. This is because your unsecured creditors would get this money if you filed a Chapter 7 bankruptcy.

Even if you have a non-exempt tax refund, your bankruptcy attorney may be able to save your refund under certain circumstances. One trick to apply the non-exempt portion of your expected income tax refund to next year’s taxes. The IRS will keep your tax overpayment and use it for taxes you may owe in the future. The Tenth Circuit case of Weinman v. Graves, 609 F.3d 1153 (10th Cir. 2010) holds that the bankruptcy trustee cannot force the IRS to turnover a tax refund that is held to pay future taxes. The election to apply the refund to your future tax liability is irrevocable under section 6513(d) of the Internal Revenue Code. Consequently, your interest in the refund when you file bankruptcy is limited to what is left after the IRS applies the money to next year’s tax liability.

This trick is common in Chapter 7 cases, but can be used in Chapter 13 cases as well to avoid increasing your monthly plan payment. Working closely with your bankruptcy attorney and a skilled CPA will maximize the amount of money you get to keep. If you are expecting a large income tax refund, but need to file Chapter 13, speak with an experienced bankruptcy attorney and discuss your options. Your attorney can explain how the federal laws can protect your assets and discharge your debts.

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Stopping a Tax Offset for a Defaulted Federal Student Loan

January 23rd, 2012

Federal student loans are guaranteed by the US government and administered by the Department of Education. When a borrower defaults on the loan, the Department of Education may refer the loan to the Department of the Treasury for collection. The Treasury issues your tax refund check, which can be offset to pay your defaulted student loans. The Treasury will offset your entire refund, even if it includes money owed to your non-obligated spouse or an earned income tax credit.

So what can you do to stop this nightmare?

First, the Department of Education is required to send you notice of the offset. You are entitled to a hearing and an opportunity to present evidence when challenging the debt. If you make a timely request for a hearing, the collection process must stop. So it is in your best interest to review the loan documentation and request a hearing if there are mistakes. During that time you should also contact the Department of Education, negotiate a repayment schedule, and request that all garnishments and seizures cease.

Second, you should check with the Internal Revenue Service and see whether your tax refund will be offset. The number to the IRS Offset Hotline is 800-304-3107.

Third, if you filed a joint income tax return, your spouse may be eligible to reclaim his or her portion of your joint refund. Your spouse must file an “injured spouse” claim form (IRS Form 8379) with the Internal Revenue Service. Questions regarding the amount your spouse will receive can be answered by the IRS by calling 800-829-1040.

Fourth, you may be able to stop the collection process if you can show evidence of financial hardship. You must contact the Department of Education and submit documentation to support your claim. The Department of Education will consider your claim and may agree to modify the withholding action.

Finally, bankruptcy may stop an offset of your income tax refund. The bankruptcy laws on this matter are complex and require the attention of an experienced attorney. In general, the bankruptcy code allows a creditor to offset money owed to the debtor against a pre-bankruptcy debt. The offset must involve the same parties to the credit and the debt. If the creditor wants to perform an offset during the bankruptcy (for instance, during a Chapter 13 bankruptcy), it must first ask the bankruptcy court for relief from the automatic stay.

If you have defaulted on your student loans, you may be able to stop an IRS offset of your income tax refund. It is important to discuss the specifics of your situation with an experienced Las Vegas bankruptcy attorney by calling Haines & Krieger at 1-800-LAWYERS. Your attorney can recommend the best course of action to protect your assets and income.

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