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Haines & Krieger LLC, Attorneys, Las Vegas, NV

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Options For Secured Property In Chapter 7 Bankruptcy

May 7th, 2012

During your Chapter 7 bankruptcy, you may hear the trustee or your own attorney say, “Secured property must be paid for or returned.” If you have a debt that is secured by a lien on property, you must make arrangements to pay the creditor or surrender the property. That is the general rule, but its not always the case.

A lien is a interest given to a creditor that secures future payment of a debt. If you fail to make your payments as agreed, the collateral pledged as security for the loan can be repossessed (or foreclosed in the case of a home loan). A lien will generally survive a Chapter 7 bankruptcy case, hence the “pay or return” statement. For instance, you cannot discharge a loan secured by a car and keep the car. You have three options concerning secured debts on Chapter 7 bankruptcy:

Reaffirmation – if you want to keep the secured property and continue paying the loan, you can reaffirm the debt and continue the relationship with the creditor. The debt and lien survive the bankruptcy by mutual agreement between the debtor and creditor.

Redemption – secured property can be redeemed for its fair market value during Chapter 7 bankruptcy. Redemption does not apply to home mortgages.

Surrender – If you cannot afford to keep and continue paying on a secured item, you can surrender the property back to the creditor and “walk away” owing nothing.

A fourth option, called “ride through,” may be available under certain circumstances. “Ride through” occurs when the debtor discharges the debt, but the creditor is unable to enforce its lien because of a lack of breach of contract or some other state law impediment. Finally, if you have pledged household property that you own to secure payment of a personal loan, you may be able to strip off the lien and keep your property.

Your bankruptcy attorney will evaluate your secured property and recommend a course of action. While each case is different, the Chapter 7 debtor generally keeps all of his or her property. The bankruptcy laws are flexible to discharge burdensome debt and allow you to keep your home and family vehicles. Speak with an experienced attorney concerning the specifics of your case.

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3 Factors Las Vegas Debtors Must Meet to Discharge Student Loans in Bankruptcy

May 6th, 2012

One thing media discussions on student debt always include is that student debts aren’t dischargeable in bankruptcy. Unfortunately for many people seeking the counsel of a Las Vegas bankruptcy lawyer, their student loans will probably not be dischargeable in bankruptcy. However, technically this isn’t absolutely true according to the bankruptcy code. Sometimes student debts are dischargeable in a Chapter 7 bankruptcy. It’s just exceedingly difficult to pull off.

The petitioner must meet what’s called the “undue hardship test,” which refers to the portion of the bankruptcy code that states, “[T]his title does not discharge an individual debtor from any debt … unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for [educational loans].” (11 U.S.C. § 523 (a)(8) [http://www.law.cornell.edu/uscode/text/11/523]) The question is, what does “undue hardship” mean here? The statute doesn’t provide a definition, leaving the bankruptcy courts to interpret it, and interpret it they have, as in the 1987 case, Brunner v. New York State Higher Education Services Corp. The 2nd Circuit Court of Appeals (NY, CT, and VT) created a three-prong test for the debtor to demonstrate “undue hardship.” The debtor must demonstrate:

(1)  She cannot maintain a minimal standard of living for herself or her dependents if forced to repay the loan,

(2)  Circumstances exist indicating this state of affairs is likely to persist for a significant portion of the repayment period, and

(3)  The debtor has made a good faith effort to repay the loan.

To make things more complicated, not all courts use the Brunner test. In the 1st Circuit (ME, NH, MA, and RI) and 8th Circuit (SD, ND, NE, MN, IA, MO, and AR), the “Totality of the Circumstances Test” prevails, which requires the debtor to prove by a preponderance of the evidence that:

(1)  The debtor’s past, present, and reasonably reliable future financial resources;

(2)  The debtor’s and all dependants’ reasonably necessary living expenses; and

(3)  All other relevant facts or circumstances unique to the debtor’s case that prevent the debtor from paying the student loans in question, while still maintaining a minimal standard of living.

Although the Totality of the Circumstances Test gives the bankruptcy judge a lot of leeway, unfortunately the 9th Circuit, which includes Nevada, uses the more restrictive Brunner test. Thus, if you have a lot of student loan debt, it will probably be harder for you to discharge your loans than in other states. That’s not a reason to give up hope. A Chapter 7 Las Vegas bankruptcy can help you discharge other debts quickly, or you might benefit by placing your student loans in a Chapter 13 repayment plan with the hope that your income will be greater in three to five years.

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 1-702-880-5554 to set up your free consultation.

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Discharging Credit Cards Through Chapter 7 Bankruptcy

May 3rd, 2012

A Chapter 7 bankruptcy case can discharge many financial obligations, including credit card debts. A Chapter 7 discharge means that the credit card company is permanently prohibited from trying to collect from you.  The debt is unenforceable against you, and you are not required to pay income taxes on the discharged debt.

Credit cards are classified as “unsecured debts,” the lowest category of debts during bankruptcy. Other common unsecured debts are medical bills and signature loans. The payment of an unsecured debt is not guaranteed by a pledge of property (e.g. a car loan).  Consequently, when an unsecured debt is discharged in a Chapter 7 bankruptcy, the creditor typically receives nothing.

Discharging a credit card debt in a Chapter 7 bankruptcy case comes down to one simple rule: was the debt incurred honestly? The Chapter 7 bankruptcy laws favor discharging credit card debt and giving the honest debtor a fresh start. However, the law balances the scale by withholding the discharge when the debtor is less than honest.

First, a credit card that is not listed in your Chapter 7 bankruptcy case is often excluded from your discharge. This is especially true if you continue to use the card during or after filing bankruptcy. The additional charges made after filing bankruptcy cannot be discharged, and becomes good evidence of an intent to conceal the credit card from the court and the bankruptcy filing from the creditor.

Second, if you go on a spending spree with our credit card immediately before filing bankruptcy, those charges are presumed non-dischargeable. This rule includes “luxury purchases” of more than $600 made within 90 days of the bankruptcy, as well as charges made on your card that you have no intention of repaying. The best advice is to stop using your credit card before you file bankruptcy.

Third, if you take cash advances totalling $875 within 70 days prior to filing bankruptcy, the debt is presumed non-dischargeable.

Fourth, a false statement to the credit card company on your application could be used to deny discharge of the debt. While credit card companies seldom use this tactic, if there is plain evidence of fraud (e.g. your yearly income was $20,000, but you claimed it was $200,000), the credit card company may file an adversarial action during your case and seek to deny your discharge.

Discharging credit card debt is usually a simple matter in a Chapter 7 bankruptcy case. It is very important to answer your attorney’s questions honestly and fully in order to receive the best advice. Your attorney can often avoid problems when they are revealed in advance, and can get you the relief you need.

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6 Things to Know about ‘Luxury Goods and Services’ in Las Vegas Bankruptcy

May 2nd, 2012

One of the changes the 2005 bankruptcy law made was to lower the minimum amount of debt a debtor could take on within 90 days of filing bankruptcy for spending on “luxury goods and services.” If the amount of debt is greater than this minimum threshold, then the debt is presumed to be fraudulent and therefore nondischargeable. Thus, there are several reasons for those considering filing Las Vegas bankruptcy to know about luxury goods and services.

(1)  The new law reduced the amount of debt spent on luxury goods from $1,225 to merely $500 within 90 days of filing. This sum is not indexed to inflation.

(2)  That $500 limit applies only to debt taken from a single creditor for luxury goods and services. It does not apply to all spending on luxuries. This means, in theory, that a debtor could take on more than $500 so long as it was owed to different creditors and no one creditor is owed more than $500.

(3)  On the other hand, the $500 amount is an aggregate limit, meaning that multiple purchases owed to a single creditor tally towards the $500 total.

(4)  If the debt obtained for luxury goods and services was somehow secured, i.e. it was not consumer debt, then it’s dischargeable at any amount. This is exceedingly rare, if it occurs at all.

(5)  Importantly, the bankruptcy code [http://www.law.cornell.edu/uscode/text/11/523] defines luxury goods and services by what they are not. The term does not include, “goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor.”

(6)  If a creditor believes the petitioner fraudulently purchased luxuries, then it will almost initiate an adversary proceeding against the petitioner to make the debt nondischargeable. This means that whether a purchase is a luxury good is largely up to the bankruptcy judge’s discretion.

The bankruptcy code is very vague as to what is or is not a luxury good or service. It is, however, fairly generous to petitioners. The purpose is to prevent debtors from going on spending sprees and then discharging the debt in bankruptcy. Given that the time limit is only 90 days, and that the debtor will have other requirements to fulfill before filing, e.g. mandatory credit counseling, most debtors don’t encounter the problem of determining whether a purchase is a luxury. Even if one goes over the $500 limit, for instance to buy a new refrigerator, so long as it’s not a high-end model with needless features, it will probably still slip by. That said, luxury goods and services are just one of the many pitfalls in the bankruptcy code that a creditor can use against you, which is why an experienced Las Vegas bankruptcy attorney is necessary for handling your case effectively.

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 702-880-5554 to set up your free consultation.

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9 Tactics Hospital Debt Collectors Use in Las Vegas

May 1st, 2012

Times have not been good for hospitals in the U.S. Large numbers of Americans do not have health insurance, but they get sick and injured just the same, which causes them to amass a lot of medical debt. When they get sick again they often have no choice but to use their credit cards or accept emergency care. As a result, according to the New York Times, hospitals have large, unpaid accounts receivables. In 2010, 5,000 community hospitals gave out $39.3 billion in uncompensated health care, which was 16 percent higher than in 2007. To deal with this, hospitals now hire debt collection agents to ensure that hospitals are paid, including for services given earlier. Here are nine examples of things debt collector hospital employees do to ensure the hospital is paid.

(1)  Hospitals have debt collectors stand at the front of emergency rooms and demand payment. Often debt collectors will discourage people from taking emergency care entirely if they can’t afford it, or they will demand that patients pay for their previous hospital visits before entering the emergency room.

(2)  The debt collectors use scripts—just like when they call debtors on the phone—to ask for payment, such as telling patients that they can retrieve their checkbooks from their cars to pay for previous visits.

(3)  Some companies give collectors access to confidential patient information, which is in violation of federal law, to help them enforce payment.

(4)  Most of the time hospitals turn to debt collectors after the care has been provided, but more recently, they’ve started turning over the management of front-end stations (appointment scheduling, patient registration) to debt collection companies to monitor patient payment.

(5)  Collectors often pressure employees to collect payment from as many patients as possible, even going so far as to reward them with gift cards for good performance.

(6)  Debt collectors even focus on extracting payments from women checking into obstetrics wards for labor and delivery.

(7)  Collection efforts become so aggressive that sometimes other hospital staff members claim it interferes with their provision of health care. The Emergency Medical Treatment and Active Labor Act requires hospitals to provide emergency health care without regard to citizenship, immigration status, or ability to pay.

(8)  Collection companies begin tracking patients who have not paid in “stop lists.”

(9)  Collection companies sometimes do not identify themselves as debt collectors, often in violation of state law.

Medical debt is a serious problem facing Americans, but hospital debt collectors often break the law when attempting to collect on debts, such as patient privacy laws and debt collection practice laws. If you had to take on debt to pay for medical care, and it’s a burden to you, a Las Vegas bankruptcy lawyer can help you with your debt situation so hopefully you can avoid dealing with debt collectors in person.

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 702-880-5554 to set up your free consultation.

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Who Files For Bankruptcy?

April 30th, 2012

Financial difficulty crosses all socio-economic lines. Its not just “poor” people that file for bankruptcy relief, sometimes “rich” people file also. Recently former NFL player Warren Sapp filed Chapter 7 bankruptcy in South Florida. Despite earning an estimated $40 million during his career, and a monthly income in excess of $100,000, he now seeks protection from more than $6 million in debts.

Each year celebrities and athletes file bankruptcy, but rarely does a federal judge need the protection of the federal bankruptcy laws. The Wall Street Journal has reported that Judge Otis Wright II of California’s Central District has filed for Chapter 7 bankruptcy. Chapter 7 is an “erase-your-debts-and-start-fresh” bankruptcy. Creditors during a Chapter 7 bankruptcy generally receive little or nothing through the liquidation of the debtor’s assets.

Judge Wright’s bankruptcy petition and schedules show that he has assets of $833,426 and liabilities of $895,292, including more than $70,000 in credit card debt. Federal judges make about $174,000 per year. The Chapter 7 bankruptcy trustee plans to put Wright’s California home in Los Angeles County on the market to pay his creditors. The asking price is about $1.2 million with a debt of about $800,000.

Prior to filing bankruptcy Judge Wright and his wife drained his retirement funds to creditors. While his efforts to try and pay creditors were admirable, retirement funds are generally protected during bankruptcy. Your bankruptcy attorney will often advise against cashing out retirement funds to pay debts that may be paid or discharged during the bankruptcy case.

Bankruptcy is a federal legal process to reorganize your finances and free you from oppressive debt. The bankruptcy laws are flexible to help those who need a fresh start – despite fame or fortune. If you need this type of help, speak with an experienced bankruptcy attorney.

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4-Point Primer for Las Vegas Residents on How Mass Joinder Foreclosure Lawsuit Scams Work

April 29th, 2012

Normally when someone owns a distressed property, he or she consults with a Las Vegas bankruptcy lawyer to discuss possible solutions. Not everyone does, however, and some people hope the problem will solve itself, or worse, fall for a scam. Recently, the New York Times reported on a new type of scam that targets distressed property owners: “mass joinder foreclosure lawsuits.” A mass joinder is a type of class action lawsuit, and in the case of foreclosure, it involves a group of homeowners joining together to sue lenders to obtain mass loan modifications or stop foreclosures. Here’s how they work.

(1)  A firm—not an actual law firm—sends out solicitations via direct mailings to homeowners whose mortgages are underwater, in default, or approaching foreclosure.

(2)  The firm offers the benefits of participating in a mass joinder lawsuit: reduction in interest rates, principal reductions, halt foreclosures, obtain money damages, and even handing them title to their properties free and clear of their mortgage obligations.

(3)  Unlike a class action lawsuit, a mass joinder requires the plaintiffs to pay in advance of joining. In mortgage situations they ask for up to $10,000 up front to pay legal fees. The firm then does nothing, merely accepting the money without providing a service.

(4)  According to the Federal Trade Commission (FTC) [http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt082.shtm], mass joinder lawsuit firms sometimes have only one attorney on its payroll. This attorney does not look over any “client’s” mortgage, and often is not licensed to practice law in the plaintiff’s state, which is a violation of FTC rules. In some circumstances, homeowners discuss their cases with an unqualified sales representative who gives out inaccurate information and makes deceptive claims about their expertise.

Homeowners who are underwater or facing foreclosure are in a precarious situation, but there’s no good in handing over your money to people who contacted you by mail and made sweeping claims about the results they can obtain for you. An experienced Las Vegas bankruptcy attorney is a far better option to being defrauded.

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 702-880-5554 to set up your free consultation.

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Know Your Rights When Dealing With Old Debts

April 27th, 2012

A debt you cannot afford to repay can make your life miserable. Fortunately, there are legal solutions to an overwhelming debt problem. One remedy is the statute of limitations. This law discourages unreasonable delay by limiting the time a creditor has to bring a lawsuit against you. The creditor cannot simply harass you forever and must file a lawsuit within a number of years or be forever legally barred. A time-barred debt cannot be legally enforced by the creditor or a subsequent collector.

Whether an old debt is time-barred depends on a number of factors. First, different time limitations can apply to written contracts, oral contracts, or even to credit cards. Consult with your attorney to determine whether your debt is time-barred. Second, the time when the limitation clock starts, or tolls, can sometimes be difficult to ascertain.  Generally, the clock starts on the day you last made a payment on the debt. For instance, if the statute of limitations is five years, the debt would be time-barred if the creditor does not file its lawsuit within five years after your last payment. If you make a payment within the tolling period, the clock resets for another five year period.

A debt collector is allowed to contact you concerning a time-barred debt. The collector does not have to volunteer that the debt is time-barred, but is required by law to answer truthfully if you ask if the debt is beyond the statute of limitations. You can also dispute a debt that you believe is time-barred by sending the collector a letter within 30 days of receiving a written notice of the debt. Tell the collector that you dispute the debt, that you believe that it is time-barred, and ask for verification of the debt. A collector must stop trying to collect until you receive verification.

The statute of limitations is a defense to be used by a defendant in a lawsuit. On the other hand, discharging the debt in bankruptcy will stop a lawsuit on the debt from ever being filed. A bankruptcy discharge is a permanent legal injunction directed at the creditor and all subsequent collectors prohibiting any attempt at collecting the debt. That includes telephone contacts, letters, lawsuits, or garnishments.

If you have an old debt that has recently reappeared, speak with an experienced bankruptcy attorney and discuss your legal rights. The debt may be time-barred, or another legal defense may exist. You may also consider bankruptcy to stop any further harassment or collection.

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Kansas Bankruptcy Court Protects Earned Income Tax Credit

April 24th, 2012

A Kansas Bankruptrcy Court has upheld the constitutionality of a Kansas law protecting a Chapter 7 debtor’s Earned Income Tax Credit (EITC) during bankruptcy. This law was challenged by the bankruptcy trustee who argued that the Kansas legislature could not write a law that only applied to bankruptcy proceedings. Bankruptcy is a federal process and its laws are written by the U.S. Congress.

The Kansas law created a new bankruptcy exemption for Kansas debtors. It allows bankruptcy debtors to protect their EITC money, a tax credit designed to assist low- and moderate-income families. However, the this exemption only protects EITC money during bankruptcy and does not apply outside of bankruptcy.

The Chapter 7 bankruptcy trustee challenged the constitutionality of the law by stating that it violates the Uniformity Clause. See In re Westby, No. 11-40986, 2012 Bankr. LEXIS 1428, (Bankr. Kan. April 4, 2012). There is currently a split of opinion in the federal courts whether state exemptions that only apply to bankruptcy proceedings are constitutional. The Kansas Bankruptcy Court in Westby found that Kansas’ EITC bankruptcy exemption did not violate the Uniformity Clause or any other constitutional provision. These cases could open the door for more debtor bankruptcy protections at the state level.

The full opinion can be found on the Kansas Bankruptcy Court website: http://www.ksb.uscourts.gov/images/ksb_opinions/JMK_11-40986-45.pdf

The federal bankruptcy process is a complex combination of federal and state laws. Navigating this process alone is like walking through a minefield while blindfolded. An experienced bankruptcy attorney can guide you through this complicated process, protect your rights and property, and get you a fresh financial start.

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3 Factors Affecting Whether the Trustee will Take Your Tax Refund in a Las Vegas Bankruptcy

April 22nd, 2012

Tax season has just ended, and many Americans will receive a refund from the IRS. For those considering filing a Chapter 7 Las Vegas bankruptcy, the question arises: since the refund is income, does it go to the bankruptcy estate and can the Trustee take it? In most cases, the answer is yes, three factors are involved.

  • The size of the refund. If it’s small, sometimes the Trustee will choose not to distribute it to creditors. This is a simple cost-benefit test of the cost of distributing it, so if it’s a few hundred dollars, it might be distributed.
  • Whether you can exempt the refund. One might think that something like a tax refund wouldn’t be subject to an exemption since it’s money owed to the government, but in some circumstances it can be. Nevada, which does not allow petitioners to use the federal exemptions, allows petitioners to exempt an earned income tax credit. If that is unavailable for whatever reason, Nevada also allows up to $1,000 of property to be placed in a “wild card” exemption. The tax refund can be placed here if the exemption hasn’t been used up already.
  • Other unpaid taxes. If you have any unpaid taxes from previous years, then the refund will go to those rather than the other creditors. This is because older taxes are priority debts under the tax code, meaning they get paid off first.

Any taxes you pay via withholdings are prorated over the course of the year until your bankruptcy filing, so if you filed in April, then the refund will be prorated for the January through March withholdings. The Trustee will inform you that he or she will distribute the tax refund during the 341 meeting. Finally, it’s permissible to file your return, obtain your tax refund, and then spend it on acceptable expenditures, for example, daily necessities or any legal fees you have related to your bankruptcy.

Income tax refunds are a small part of bankruptcy, but they might go unnoticed by people who choose not to hire an experienced Las Vegas bankruptcy lawyer.

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 702-880-5554 to set up your free consultation.

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