Tuesday, December 27, 2011

5 Common Misconceptions about Bankruptcy: #1 I Should be Ashamed


Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy.  In these 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #1: I Should be Ashamed

"The Congress shall have power to…establish…uniform Laws on the subject of Bankruptcies throughout the United States"
 -The Constitution of the United States, Article 1, Section 8, Clause 4

Bankruptcy is one of the oldest laws in the United States, and was included in the original 1787 draft of the U.S. Constitution. In fact, the originating language is older than the Bill of Rights. The Founding Fathers recognized that a system of laws was necessary to protect the “honest but unfortunate debtor”, and such laws were in the general interest of the country and its citizens.

Many people are proud to stand up for, and take advantage of, their constitutional protections – and they should be. From its original incarnation and its amendments over the years, such protections have become the cornerstone of our society, our government and our way of life.

So, should you be ashamed of filing for bankruptcy?

Well, are you are ashamed of your freedom of speech, or freedom from unwarranted searches and seizures, or freedom of self incrimination? Are you ashamed of your right to elect a president or legislative representatives? Why be ashamed of utilizing one constitutional protection, but not others?

Now, I am not suggesting that filing bankruptcy is somehow a patriotic thing to do. Actions have consequences, and the consequences to bankruptcy should certainly be considered whenever you are considering any debt resolution plan. Put another way, just because you can doesn’t always mean you should. But, if you ever find yourself in the position where you should be considering bankruptcy, know that you are in good company. Thomas Jefferson, Alexander Hamilton, and Benjamin Franklin, among others, would have supported your ability to do so.

If you’re not swayed by my flag-waiving, red, white and blue history lesson, ask yourself which is more shameful: Finding yourself and your family in a difficult financial situation and choosing to do nothing about it, or finding yourself in a difficult financial situation and using the law to improve your finances so that you can better provide for you and your family’s needs.

Kelsey & Trask, P.C.’s attorneys are here to help you find financial freedom no matter what mistakes you have made in the past. If you’ve made some questionable financial decisions in the past, admit your mistakes, correct your behaviors, and find a qualified attorney to help fix the problem.

After all, it’s your right to do so.

Thursday, December 22, 2011

5 Common Misconceptions about Bankruptcy: #2 How do I get a Free House?

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy.  In these 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #2: How do I get a Free House?

In our last post, we discussed the misconception that bankruptcy discharges all debts.  There are some debts that you might still owe even after filing bankruptcy.

In addition, there are some debts which you can choose whether to still owe or not: Secured Debt.  Secured Debt is debt that you have agreed to pledge some collateral for, and in the event you don't pay the debt then the creditor can take the collateral.  Some common examples of secured debt are house mortgages or car loans.

In most cases secured debt can be discharged or kept, depending on whether you want to keep the collateral.  However, you cannot keep the collateral and discharge the debt.  There are no free houses and cars in bankruptcy.  Although you may have exempt equity in a car or house, if you cannot pay the loan you do not get to keep the collateral.

Tuesday, December 20, 2011

5 Common Misconceptions about Bankruptcy: #3 Freedom from All Debts


Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy.  In these 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #3: Freedom from All Debts

Another common misconception about bankruptcy, is that once it is over you no long owe any money to anyone.  In some cases this is true, but those cases are very rare.

Most people have some debts which are nondischargeable, which means they will still owe those debts, even after the bankruptcy is complete.  You may still be responsible for most taxes and student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines, penalties, forfeitures and criminal restitution obligations; certain debts which are not properly listed in your bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel or aircraft while intoxicated on alcohol or drugs.

Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Thursday, December 15, 2011

5 Common Misconceptions about Bankruptcy: #4 Filing is Free

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy. In the next 5 posts we will write about the most common misconceptions that we hear from clients in our office.

Common Misconception #4: Filing is Free

Many people believe that filing for bankruptcy means you have reached a point where you have no money left.  If you have no money left, then filing for bankruptcy must be free, right?

Actually, most people who file for bankruptcy have some assets and some income.  They simply don't have enough income or assets to keep up with their debt.

And filing for bankruptcy is not free, but it is a bargain.  The filing fee for filing a Chapter 7 Bankruptcy is $306 and for a Chapter 13 Bankruptcy is $281.  In addition, our attorney's fees range from $999 to $3,500 for a consumer bankruptcy, depending on how complicated the case is.  For clients who are concerned about paying a few thousand dollars to file for bankruptcy, we usually point out that this amount is much much smaller than the amount of debt being discharged in exchange.  If someone told you that they would settle your $50,000 credit debt for $2,000 you would probably take them up on it.

For a more specific calculation of what a bankruptcy would cost in your case, visit our Bankruptcy Cost page.

Tuesday, December 13, 2011

5 Common Misconceptions about Bankruptcy: #5 Picking & Choosing

Unlike other legal issues, unmanageable financial debt is a problem that many are too ashamed to discuss with their friends and family. This means that many people piece together their knowledge about bankruptcy from unreliable and confusing sources. The result is that there are a lot of misconceptions about bankruptcy. In the next 5 posts we will write about the most common misconceptions that we hear from clients in our office.

 Common Misconception #5: Picking & Choosing

Many people believe that they get to pick which debts to "bankrupt." Some clients don't want to report a debt owed to a family member, because they don't want that person knowing about their bankruptcy. Other clients only want to "bankrupt" specific debts but not all of their debts. That is not how bankruptcy works. 

Every debt you owe must be completely and accurately disclosed in the documents filed to commence your bankruptcy case. Bankruptcy is not a "pick and choose" proceeding. You cannot not put some debts in and leave other debts out. Intentionally omitting debts from your bankruptcy case may result in the non-dischargability of those debts, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

Sunday, December 11, 2011

Visit the Office of the Future in the World of Tomorrow!


Thanks to FirmFuture presenter Gabriel Cheong for inspiring us to make better use of our iPad in the office.


Now when you schedule an initial consultation we can use our iPad, displayed on the flat screen TV (pictured above), to show you:


And if you want any of the information printed out so you can take it home, our new laser HP printer can print directly from the iPad right in our conference room, using WiFi magic.

These are just some of the ways that we are trying to design our new office, at 160 Speen St, Suite 202, Framingham, MA, to be as friendly, convenient and useful to current or potential clients.  If you are interested in checking it out, give us a call at 508.655.5980 or set up an appointment online here.

Monday, November 28, 2011

Special Considerations When Surrendering Condominiums in Bankruptcy

When you file for Chapter 7 Bankruptcy, and indicate on your bankruptcy schedules that you intend to surrender your real property and discharge the underlying mortgage debt, I often recommend to my clients that they stop paying the mortgage as soon as the decision to surrender is made. Upon discharge at the conclusion of the bankruptcy, the debtor’s ongoing contractual obligation to pay will be discharged by the Bankruptcy Court, meaning that the debtor no longer has to legally pay the mortgage. Of course, the bank now may move to foreclose on the property and re-take title to protect its secured interest in the now-discharged loan, but the lender will not incur any new legal liability to the bank. This applies even if months (or even years) pass between when the debtor filed his Chapter 7 case, and when the bank finally completes the foreclosure on the surrendered property.

You should pay special attention to situations where the property you are surrendering real property that is subject to an fee or assessment from a condominium association, homeowner’s association, or cooperative corporation. Under 11 U.S.C. § 523(a)(16), pre-petition fees and assessments are dischargeable in a debtor’s bankruptcy but all post-petition condo fees, association dues, or co-op charges are not dischargeable, “for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in [the property]. This means that you are legally obligated to pay these fees (but not the mortgage) for as long as you own the property – up to and until the lender formally takes title to the property in foreclosure. Given that some lenders can take months (or even years) to foreclose on a property surrendered in a Chapter 7, 11 U.S.C. § 523(a)(16) places a significant financial burden on owners of condos, homeowner’s association members, and co-op tenants. The Automatic Stay will provide some relief to the debtor during the pendency of the bankruptcy, and the association cannot take any action to collect the fees while your case is before the court. However, the monthly charges will continue to accrue. If you do not pay the fees, the association may commence legal proceedings or make other appropriate efforts to collect the debt.

If you own property that is subject to such a fee or assessment, be sure your bankruptcy attorney is aware of these obligations. While there is no way to discharge the post-petition fees or assessments, it is possible to minimize the impact of 11 U.S.C. § 523(a)(16). Options include:

1. If possible, wait to file your bankruptcy case until after the foreclosure auction has taken place, thereby ensuring all fees are pre-petition debt.

2. If you are no longer residing in the property, consider renting out the property, and use the rental income to pay the association dues.

3. Don’t pay. However, if the debtor lives in a jurisdiction where foreclosure is taking years, the debtor risks exposure to a lawsuit for personal liability. Nevertheless, once the foreclosure is complete, the foreclosing lender must cure the deficient fees and assessments in order to pass clear title to the new buyer. This option involves a great deal of uncertainty, and risk to the debtor, but may be the only option in some circumstances.

4. Consider a short sale. Since your mortgage deficiency will be discharged (or was already discharged), a short sale can significantly shorten the amount of time the property is in your name, and can expedite the transfer of title.

Monday, November 7, 2011

New Median Income Figures Released for all Bankruptcy Cases Filed after November 1, 2011

The United States Trustee Program has released new Census Bureau data which is used for means testing calculations regarding Chapter 7 bankruptcy petitions, and for calculating the plan commitment period for Chapter 13 cases. Due to the updated figures, the various standards for the expenses in the "means test" form will change for all bankruptcy cases filed on or after November 1, 2011.

The new figures reflect a decrease in the median income, and will make it more difficult for individuals to file for Chapter 7 bankruptcy. Additionally, the decrease in the median income, coupled with amendments to the National and Local standards may require a longer commitment period for Chapter 13 cases.

In Massachusetts, the new Median Family Income figures are as follows:

Family Size of 1: $53,496
Family Size of 2: $64,174
Family Size of 3: $80,337
Family Size of 4: $99,067

In addition, add $7,500 for each individual in excess of 4.

For a list of the updated median family income figures for other states, as well the updated National Standards and Local Standards is provided here.

If your household income exceeds the median income for your state of residence, other factors are considered for means testing criteria. In addition to updated median income figures, the Department of Justice and Internal Revenue Service have also updated National Standards for Food Clothing & Other Items; National Standards for Out-of-Pocket Health Care Expenses; and Local Standards for Housing, Utilities and Transportation.

While the changes in the Median Income, National Standards and Local Standards have effectively "raised the bar" for new Chapter 7 cases, the changes are not so significant to place bankruptcy out of reach for most individuals and families requiring assistance. If you would like to know more about your options for finding financial freedom, contact Attorney Matthew P. Trask for an initial debt-relief consultation, or call 508.655.5980.

Tuesday, November 1, 2011

5 Contributors to Your Credit Score [Infographic]

Though credit scores play an integral role in our lives, few of us actually know which factors make up the numbers assigned to us and how they are weighted. The following credit score infographic sheds some light on this subject.

Infographic: 5 Contributors to Credit Scores
Courtesy of: Credit Card Education


Reprinted from: CreditCardEducation.com.

Kelsey & Trask, P.C. provides this graphic for informational purposes only. We do not endorse nor claim endorsement from the source site or organization. Kelsey & Trask, P.C. is not responsible for any information contained therein, unless indicated specifically on that site.

Wednesday, October 26, 2011

FAQ #30: I Received My Discharge, but Creditors are Still Calling Me. What Should I Do?

Although you no longer owe any scheduled (and dischargeable) debts following your bankruptcy, it is important that you do not simply ignore a creditor’s efforts to collect a debt after discharge.

Call your attorney right away, and be sure to provide copies of any letters, bills or notices you received, or the name, business name and telephone number of the creditor or collection agency that has contacted you. Any creditor that received notice of your bankruptcy and was included on the creditor matrix cannot continue to collect any debt that was discharged. Any entity that does so is in contempt of an Order of the U.S. Bankruptcy Court.

Any efforts to attempt to collect a discharged debt are unlawful, and if the creditor’s actions are deemed to be a willful violation of the Court’s Order, the creditor can be forced to pay the debtor’s actual damages, and, in certain cases, punitive damages. As a practical matter, most cases of a creditor attempting to collect on a discharged debt can be resolved with a simple letter to the creditor, as well as a copy of the Discharge and Creditor Matrix. Additional bankruptcy litigation (and the costs associated with having to go to Court is usually not necessary.

Monday, October 24, 2011

FAQ #29: What happens if I forget to add a creditor to my bankruptcy?

As we discussed in response to a previous question (Do I have to include all my bills when I file bankruptcy?), every debt you owe must be completely and accurately disclosed in the documents filed to commence your bankruptcy case. Bankruptcy is not a "pick and choose" proceeding. You cannot not put some debts in and leave other debts out. Intentionally omitting debts from your bankruptcy case may result in the non-dischargability of those debts, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

The bankruptcy court requires that you undertake an appropriate level of “due diligence” to determine your debts and your potential creditors. This means that you need to make a concerted effort to review supporting documentation, such as a credit report, account statements, collection notices, and other information pertaining to the existence of a debt or potential claim. When you sign your bankruptcy petition, and testify at the §341(a) Meeting of Creditors, you are indicating to the Court that your petition is “true, accurate and complete”. Bankruptcy will only discharge “scheduled” debts – meaning the creditor must receive notice of the bankruptcy – and any debt not listed in your creditor matrix may not be discharged.

So, then, what happens if you unintentionally omit a creditor?

In most cases, if the mistake was unintentional (i.e., you forgot about the debt, or did not know about the claim), and you have not yet received your discharge, it is possible to file an amended schedule of your debts to include the missing items. This involves preparing a new list of debts, and preparing a Motion for Leave to Amend Schedules, which is a formal request to the Court for permission to add the new creditors. The Court will almost always allow the motion, but there is a $26.00 filing fee for the Motion to Amend. Additionally, the Court will usually give your added creditors sufficient time to object to claimed exemptions or the dischargability of the new debt. The added time will delay your discharge. Still, it’s better to wait a little extra than to owe the debt following the bankruptcy.

If you have received your discharge and your case has been closed, the process is more complex. You must first request that the Court re-open your bankruptcy case. Cases can be re-opened for any number of reasons, including “to administer assets, to accord relief to the debtor, or for other cause” (See 11 U.S.C. § 530(b)). Courts have nearly universally held that re-opening a case to include an unintentionally-omitted creditor will “accord relief to the debtor”, and will allow the request. The Court will charge a filing fee of $260.00 to re-open a closed bankruptcy case, so be sure to conduct your “due diligence” and get things right the first time.

Monday, October 17, 2011

FAQ #28: Can I file Chapter 7 Bankruptcy Even if I Have Filed Before? How many times can I file bankruptcy?


Whether or not you may re-file (and the amount of time that must pass before you may re-file bankruptcy) depends on whether or not you received a discharge under your most recent bankruptcy filing.

If you received a discharge under a Chapter 13 bankruptcy case, then you cannot file for relief under Chapter 7 unless:

1. Six (6) years have passed since the discharge in the Chapter 13 case; or
2. You paid at least 70 percent of your allowed unsecured claims in the Chapter 13 case, and your plan was proposed in good faith and represented your best effort to pay.

If you received a discharge under a Chapter 7 bankruptcy case, then you cannot file for relief under Chapter 7 unless eight (8) years have passed since the discharge in the previous Chapter 7 filing.

If you filed a Chapter 7 or Chapter 13 case that was dismissed because you failed to obey court orders or you voluntarily requested a dismissal and did not obtain a discharge, then you cannot file for relief under Chapter 7 unless 180 days have passed since the dismissal of the previous filing.

Assuming that you meet the above time restrictions for re-filing, there is no limit to the amount of times you can file bankruptcy.


Thursday, October 13, 2011

FAQ #27: What happens to my tax refund when I file bankruptcy?


Your tax refund is what the bankruptcy court would consider an “unliquidated asset”, and is treated by the bankruptcy court like other personal property. Any unissued tax refunds would need to be listed on your bankruptcy schedules as assets, and properly exempted if you want to prevent that property from being seized by the Trustee and applied to pay your creditors. If the tax refund is fully exempt or is abandoned by the trustee, you will not be required to turn it over to the bankruptcy Trustee.

Tuesday, October 11, 2011

FAQ #26: If I am not married, but living with my partner and he pays most of the bills, will that affect filing?

Having other people in your household will not implicate your cohabitant(s), inasmuch as the bankruptcy will not affect their credit or discharge any of their debts. However, the means test (for Chapter 7 eligibility or Chapter 13 plan commitment purposes) looks at the debtor’s “total household income” when considering the income available to the debtor. Therefore, it may be necessary to disclose to the court your cohabitant’s income. Some trustees will accept the argument that, in cases where the cohabitants maintain sufficiently separate finances, the debtor’s total income is not available to the debtor. However, the debtor would need to disclose, as income, the portion of income made available for the debtor’s benefit, including any amount the cohabitant pays toward the debtor’s monthly expenses.

Friday, October 7, 2011

FAQ #25: After bankruptcy, what steps need to be taken to rebuild my credit?

First and most importantly, time heals all wounds. Only time can fully repair the damage from a bankruptcy (and being significantly behind on a lot of credit card debt beforehand).

The best thing you can affirmatively do right now is to start developing a history of on-time payments to creditors that report to your credit bureaus. Pay your bills early, or at worst, pay them on time.

Because of the way the bankruptcy system works and the way creditors report reaffirmed debts, you will not get credit for on-time mortgage payments or car payments. Therefore, it is necessary to establish a new account that you can make solid, on-time payments on. We recommend applying for a secured credit card or gas card. Before you apply, take the time to confirm that the card management company reports to all three credit bureaus every month. If they don’t report every month, or if they do not report to all three, go elsewhere. Use the card, but pay it off early or on time, every month. Carrying a small balance (less than $100 is OK), but never utilize more than 50% of the available credit.

If you have a mortgage, then as soon as feasibly possible, refinance your mortgage. Paying off the current loan and keeping a new loan current will, once again, give you credit for on-time mortgage payments.

In addition, as soon as you feasibly can, refinance your car loan, or sell your car and purchase a new car. Again, the key is to obtain a new loan that will report to the credit bureaus. Post-bankruptcy, many current secured lenders will not report payments to the credit bureaus. Of course, be sure to keep that loan current.

Obtain copies of your credit reports approximately 90 days after receiving your discharge. Ensure every debt is reported as “Discharged in Bankruptcy” or something similar. If they are not, send a letter to the creditor and the credit bureau requesting that information be reflected accurately. Remember, your credit report is a list of your “debts”, and right now, you have no debts aside from your house and car (and any non-dischargeable debts). Make sure your credit reports accurately show that, although you had debts discharged in bankruptcy you should not currently owe any money to dischargeable creditors.

Besides paying the above-described loans on time there are also a number of things you should avoid doing:

1. Avoid opening credit accounts with co-signers, if possible. Having a co-signer on an account indicates you are a greater credit risk.

2. Avoid financing with finance companies or sub-prime lenders, if possible. Doing business with these companies can actually lower your credit score.

3. Avoid future financial risk. Bulk up your savings account. Develop a budget, and stick to it. That way, when emergencies or unexpected expenses come up, you can pay in cash, rather than increasing your debt.

4. Some industry experts recommend that you obtain a small personal loan, and use the funds to open a CD account. Pay the loan on time, and when the loan is paid off, you will have some funds in savings, which you can take out once the CD matures. Of course, this only works if you can fit these payments into your budget. Setting up a workable budget should be your first priority.


Wednesday, October 5, 2011

FAQ #24: If my partner is listed as an authorized user on my credit cards, will his credit be hurt?

This is an interesting question, and the answer often depends on how the information is reflected on a credit report. An “authorized user” is someone who is merely authorized to make purchases on an account, but bears no legal responsibility to repay the debt. Some credit bureaus (TransUnion in particular) often do not report credit accounts to the individual who is an authorized user only; but others sometimes do (such as Experian).

Additionally, not all credit card companies report authorized users to the credit bureaus. If you are an authorized user on a credit account, and that account is discharged, there may be a notation in your credit profile that indicates your prior access to an account, and the fact of that accounts discharge in bankruptcy. While an intelligent loan officer should understand the distinction when making a credit decision, it is important to obtain a copy of your credit report if the primary cardholder files bankruptcy in order to understand how that debt is reporting, and contact the credit bureau in writing to correct any errors.


Monday, October 3, 2011

FAQ #23: Why would I choose bankruptcy over debt consolidation or settlement?

Debt consolidation involves getting one loan to pay off multiple smaller loans. The advantages are that the debts are paid off in full, often at little to no damage to credit, and the new loan may have more favorable terms over the old loan, such as a reduced monthly payment, a larger monthly payment (that will insure the loan is paid off quickly) or a lower interest rate.

Consolidating loans takes the logistical hassle in making sure that multiple loans are paid on time and ensures that the debtor only has to make one payment, and gives the debtor the ability to “shop around” for the best deal. However, since debt consolidation requires a new loan, someone with excessive or past-due debt may not be able to obtain a consolidation loan. Additionally, depending on the debtor’s situation, debt consolidation may not provide enough relief, especially if the borrow cannot afford the payments on the new loan.

Debt settlement is the process of attempting to pay your existing debts for less than you owe. No creditor is required to settle a debt, but for financial and practical purposes many companies will compromise the amount owed. If your creditors agree to accept less than you owe, you must usually make a lump-sum payment, which may be difficult. Also, paying a debt for less than you owe has tax consequences – the “forgiven” portion of the debt is considered to be income by the IRS, and, with certain exceptions, you will be required to pay taxes on that income.

Bankruptcy, on the other hand, ultimately involves the discharge of the obligations, meaning that you are not required to pay them back. Bankruptcy also provides other legal protections that may be beneficial to someone needing financial assistance. For example, the automatic stay in bankruptcy is a useful tool in temporarily stopping foreclosure proceedings brought by your mortgage holder(s), as well as halting collection efforts, collection calls and lawsuits filed by your creditors. Click here for more information on chapter 7 and chapter 13 bankruptcy.


Thursday, September 29, 2011

FAQ #22: If I get married after filing for bankruptcy will it affect my spouse?

If you get married after filing bankruptcy, the “taint” of bankruptcy on your credit report will not affect your spouse’s credit. However, a bankruptcy on one spouse’s credit may make it difficult to obtain joint credit accounts, which are often necessary for large purchases, such as cars or home mortgages. This is because the lender will consider the total credit risk of all parties to the note, not just the one with the good credit. While you still may qualify for a loan, a poor credit rating may exclude you from certain FHA loans, and you may be required to pay a higher interest rate over the course of the loan.

Tuesday, September 27, 2011

FAQ #21: Is there any way to have a bankruptcy removed from my credit report?

The fact that you filed for bankruptcy will appear as a “public records” entry on your credit report for up to 10 years, and individual debts that were discharged in bankruptcy will remain on your credit report for 7 years after discharge. Remember that in a Chapter 7 case, your discharge is granted approximately 5 months after filing; in a Chapter 13 case, your discharge is granted between 3 and 5 years after filing, depending on your plan terms. Despite the negative effect bankruptcy can have on your credit, it is not necessarily a good idea to attempt to make no mention of your prior bankruptcy. In some cases, the fact that a debt is reflected on your credit report as being discharged in bankruptcy is evidence to a prospective lender that you no longer owe that debt, and are more able to repay a future loan. Additionally, some prospective employers would consider a bankruptcy filing evidence of a proactive attitude toward resolving a poor financial situation, as opposed to having a credit report populated with debts that have been “written off” (but still legally owed), as opposed to debts “discharged in bankruptcy.”

Friday, September 23, 2011

FAQ #20: What assets can I keep (house, car, property)?

When filing bankruptcy as a resident of Massachusetts a debtor can choose to use the exemptions allowed under either State or Federal law, but you must choose one or the other. There are many exemptions that are similar under both schemes, such as the exemption of most qualified retirement plans. Click here to view a table of the maximum exemptions as of April 14, 2011 in categories where the state and federal exemptions differ significantly. On April 7, 2011 a new Massachusetts law went into effect significantly increasing the personal property of Massachusetts residents that is protected from seizure by creditors. Please note that these figures are subject to change and you should consult with an attorney to obtain the most current figures and to decide which option you should choose.

In addition certain types of income may also be exempt from the bankruptcy estate. You should consult with an attorney to obtain further information.

Wednesday, September 21, 2011

U.S. Bank v. Ibanez And Beyond: Massachusetts Courts Leading The Way In the Foreclosure Crisis
(Guest Post by Richard D. Vetstein, Esq.)

Bankruptcy and foreclosure are two subjects that often go hand-in-hand. Some recent court decisions have had a major impact on how foreclosures are handled in Massachusetts. To provide some insight on these decisions, we are pleased to present a guest post from Richard D. Vetstein, Esq. of Vetstein Law Group, P.C. Richard's firm runs a very popular real estate blog: The Massachusetts Real Estate Law Blog.




U.S. Bank v. Ibanez And Beyond: Massachusetts Courts Leading The Way In the Foreclosure Crisis

I’m honored to be guest blogging regarding recent Massachusetts foreclosure and mortgage crisis court rulings. Although not as impacted by foreclosures as Florida or California, Massachusetts has been a hotbed for controversial and landmark rulings in this ever-changing area. And there will be more to come as our Supreme Judicial Court will decide several more important cases in the upcoming months. Here’s a summary of what’s happened in the last year and what’s on the upcoming docket.

U.S. Bank v. Ibanez

In January 2011, the Massachusetts Supreme Judicial Court’s U.S. Bank v. Ibanez decision quickly became a huge national story. CNN-Money called it a “beat down” of the big banks. Reuters said it’s a “catastrophe risk” for banks. The ruling spooked investors, as bank stocks were down in reaction to the ruling.

Ibanez was the first state supreme court ruling to weigh in on the legal ramifications of widespread irregularities and paperwork snafus in the residential securitized mortgage industry. The high court ruled that two foreclosures of sub-prime mortgages were null and void where the lenders could not establish the chain of ownership within the securitized mortgage back securitized pools.

The Ibanez case has been attributable for the recent slowdown in foreclosure activity in Massachusetts, however, as of August the numbers are starting to pick back up as lenders are getting their acts together. It’s important for you and your bankruptcy attorney to verify whether your mortgage lenders has complied with the Ibanez case by recording the proper mortgage assignment paperwork.

Bevilacqua v. Rodriguez

We should find out any day now the SJC’s opinion in the next case in the U.S. Bank v. Ibanez saga: Bevilacqua v. Rodriguez. This case will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner, after the U.S. Bank v. Ibanez ruling in January. This case, which national legal experts are watching closely, may determine the rights of potentially thousands of innocent purchasers who bought property at foreclosure sales that have been rendered invalid after the Ibanez ruling. “The Massachusetts case will have significant repercussions in many states that allow nonjudicial foreclosure,” Alan White, a law professor, commented to BusinessWeek. “The decision in Bevilacqua will not only determine the fate of past foreclosure sale deeds, but hopefully provide guidance so that lenders and their lawyers can get it right going forward.”

Eaton v. Fannie Mae

In a rare “sua sponte” (on their own) direct appellate review, the Massachusetts Supreme Judicial Court has agreed to hear an appeal in Eaton v. Fannie Mae, considering the controversial “produce the note” defense in foreclosure cases and whether a foreclosing lender must possess both the promissory note and the mortgage in order to foreclose. Based on arguments asserted by the lender, the court may also consider the circumstances by which a mortgage granted to Mortgage Electronic Registration System (MERS) can be effectively foreclosed in Massachusetts. This could be a very important decision — potentially as important as the landmark U.S. Bank v. Ibanez. A ruling against the lenders could expose a gaping and fatal legal black hole with many foreclosure-bound mortgages that were hastily bundled and sold to Wall Street during the real estate boom years. A rejection of the borrower’s arguments as recently made by a bankruptcy judge in Worcester, however, could significantly reduce some MERS induced anxiety and heartburn presently being experienced by lenders and foreclosure attorneys.

Bank of NY v. Bailey

In the closely watched case of Bank of New York v. Bailey, the Massachusetts Supreme Judicial Court ruled on August 4, 2011 that the Housing Court may hear a homeowner’s challenge that a foreclosing lender failed to conduct a foreclosure sale in accordance with state law and under the now seminal U.S. Bank v. Ibanez decision. Previous to this decision, foreclosing lenders and their attorneys were quite successful in evicting homeowners even where there were defects in the foreclosures. Watch for the Housing Court to be on the front lines of foreclosure defense now.

Suffice to say, Massachusetts courts have been very busy with foreclosure and mortgage crisis rulings. I’ve been following these cases for a while and there is definitely a marked trend by the courts to a more balanced, pro-consumer approach in these cases. Judges are human beings and no doubt, they are not oblivious to the news and widespread financial distress going on in Massachusetts and the country today.




Richard D. Vetstein, Esq. is an experienced real estate litigation attorney who’s handled numerous foreclosure defense and title defect cases in Land Court and Superior Court. Please contact him if you are dealing with a Massachusetts foreclosure or title dispute.

FAQ #19: Will I still be able to keep my checking account? If I choose to switch banks will they give me a checking account?

You will be able to keep your checking account, provided the balance in the account is below the maximum exemption limits. If you have a checking account that is associated with an overdraft account, or a credit card issued by the same bank and file bankruptcy, the bank cannot seize money from your checking account to cover the other debts. Banks are private institutions, so they can decide that they no longer want to do business with you. However, this does not mean that they can keep your money.

If your account is ever closed by your institution, you must be given the funds in the account by bank check. Some financial institutions will make inquiries into your credit history when opening a new account, although these inquiries are usually for the purposes of extending lines of credit or an overdraft account. In addition some institutions may review your check-writing through a service like TeleCheck to determine if you are a risk of passing insufficient checks.

Monday, September 19, 2011

FAQ #18: Will I be able to rent an apartment after filing?

Yes, but you may have to shop around a bit. Each landlord has the discretion to rent to a particular tenant based on a number of legal factors, including the landlord’s determination of a tenant’s ability to pay the mortgage each month.

The landlord’s ultimate decision may depend on the circumstances that led up to the bankruptcy and a number of other factors, such as recommendations from previous landlords or other personal references. Most landlords will evaluate whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility.

As a practical matter, the ability to rent an apartment in the future should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your chances, even if you don't file bankruptcy. In that sense, not filing for bankruptcy may make you more of a financial risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility.

Honesty is often the best policy. If you know your prospective landlord will be running a credit check, be up-front and honest about what your credit contains, and the reason for your past financial difficulty. While you may need to provide more information to convince a prospective landlord, there are still many landlords who are willing to rent to tenants with a bankruptcy in their past.


Thursday, September 15, 2011

FAQ #17: Would I be able to refinance my home after filing?

Yes, and in many cases, you should. If you keep your home during the bankruptcy and do not reaffirm the debt, any later on-time payments will not be reflected on your credit report. This is due to a technical issue regarding the severability of mortgages and the note, and how debts are reported to the credit reporting agencies. However, paying off the existing mortgage and refinancing will have a much greater effect in rebuilding your credit.

Because bankruptcy (and often, the financial difficulties which gave rise to a bankruptcy filing) will make it difficult to obtain credit, many people will find it difficult to refinance immediately after bankruptcy. However, taking steps to repair credit (such as establishing a good repayment history on other reaffirmed debts or a secured credit card, maintaining a cash reserve, paying debts on time, and borrowing and repaying a small personal loan) can accelerate credit repair. If you take the proper steps to rebuild your credit following bankruptcy, you may be able to qualify for a refinance loan in as little as 2 years after your discharge.

Monday, September 12, 2011

FAQ #16: Who will know about my bankruptcy?

The bankruptcy code requires that you disclose all debts owed, and those creditors will be sent Notice of the bankruptcy filing. Therefore, anyone that you owe money to will learn about your bankruptcy.

Additionally, many bankruptcies are filed to discharge un-liquidated or contingent claims – claims arising from a lawsuit, for example – so the adverse party in the lawsuit will be aware of your filing.

Co-debtors must also be disclosed and will receive notice of filing; as will anyone that holds a leasehold interest with the debtor, such as a landlord or tenant, regardless of whether the rent is up to date.

In addition, bankruptcy is a court case. The existence of a court filing in any court is a matter of public record, so there will be a public record of a bankruptcy filing. However, this does not necessarily mean that the information will be easily obtainable by the general public. For example, in order to view bankruptcy case documents, one must either go to the Federal Courthouse in the district where the case was filed, or have the requisite credentials to obtain a PACER account (on-line access to Federal Court records). Third-party agencies can also determine that a case was filed through various public records search engines. Credit reporting agencies (Equifax, TransUnion and Experian) are able to obtain similar information. This means that anyone authorized to review your credit report will see your bankruptcy, such as prospective employers conducting an authorized background check or loan officers acting on a credit application.


Friday, September 9, 2011

FAQ #15: What is the difference between secured and unsecured debt?

Secured debts are those debts in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. In the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower. An example of this is repossession of a car or foreclosure of a home. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount.

Unsecured debt refers to any type of debt or general obligation that is not collateralized by a lien on specific assets of the borrower. In other words, in the event that the borrower fails to pay the debt, there is no collateral that the lender may recover to mitigate its financial losses resulting from the debtor’s failure to pay without suing in court.


Wednesday, September 7, 2011

FAQ #14: Do I have to go to court?

Whether you will need to go in front of a Judge largely depends on how complex your case is. In every bankruptcy case, though, you must attend the Meeting of Your Creditors (often referred to as a §341(a) Creditor's Meeting, in reference to the section of the Bankruptcy Code requiring such a meeting) about 30 to 45 days after your bankruptcy petition is filed.

The court-appointed Chapter 7 trustee will preside over this meeting. At the meeting, you will be asked to testify under oath as to the accuracy of the statements in your petition. However, most of your creditors will not appear at the meeting, and you will not be before a judge. The meeting is very informal, and in most cases will last no more than 10 minutes. If you do not attend the meeting, your case will be dismissed.

If the trustee or your creditors file objections to your claimed exemptions, or other issues are raised by a creditor or interested party, a hearing will be held in front of the Bankruptcy Court Judge, and you may be required to attend.


Monday, September 5, 2011

FAQ #13: What debts will bankruptcy not erase?

Even if you receive a general discharge, some particular debts are not discharged under the law. You may still be responsible for most taxes and student loans; domestic support and divorce settlement obligations; most fines, penalties, forfeitures and criminal restitution obligations; debts which are not properly listed in your bankruptcy filing; and debts for death or personal injury caused by operating a motor vehicle, vessel or aircraft while intoxicated on alcohol or drugs. Debts incurred to pay non-dischargeable debts will themselves be non-dischargeable as well. In simpler terms this means that you cannot, for instance, use a credit card to pay your student loans and then discharge the credit card.

Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the bankruptcy court may determine that the debt is not discharged.

Thursday, September 1, 2011

FAQ #12: What is the difference between a Chapter 7 and a Chapter 13 Bankruptcy?

Chapter 7 Bankruptcy, sometimes referred to as "liquidation" or “straight bankruptcy”, is designed for people who do not have the ability to pay their existing debts. To prove that you cannot pay your debts, you are subject to a "means test" designed to determine whether the case should be permitted to proceed under Chapter 7. The means test generally looks at the debtor’s gross income from all sources over the past six months, and if it is over the median income for your state, then you cannot file Chapter 7 bankruptcy because the formula has determined you have enough excess income to pay your debts over time. There are some exceptions to the “means test” so you should consult with an attorney to be sure.

At the end of a Chapter 7 Bankruptcy (usually about 6 months) you receive a discharge of your debts and you no longer owe those debts (except for some debts like student loans which cannot be discharged).

Chapter 13 Bankruptcy involves the repayment of all or part of your debts with your excess monthly income. Chapter 13 is designed for individuals with regular income who can pay at least some of their debts in installments over a period of time.

Under Chapter 13, you must file with the Bankruptcy Court a plan to repay your creditors all or part of the money that you owe them, using your future earnings. The period allowed by the court to repay your debts may be three (3) to five (5) years, depending on your income and other factors. The court must approve your plan before it can take effect.

Provided that you have complied with the plan and made all payments required under the plan, at the end of a Chapter 13 repayment plan (3-5 years) you will receive a discharge of the unpaid portion of your debts (except for some debts like student loans which cannot be discharged).

Because a Chapter 13 requires some payments of your debt, it is not usually a person’s first choice. However there are some good reasons to file Chapter 13:

A Chapter 13 is often filed:

1. To stop foreclosure and cure mortgage arrears, allowing someone to keep a house they might lose in a Chapter 7 case;

2. If the debtor is over the means test limit for a Chapter 7 case, but still wants a fresh start debt after 3-5 years;

3. To pay tax debt over time;

4. To protect property from creditors and avoid a Chapter 7 liquidation of assets;

5. To sell property to maximize price, rather than let it go to Chapter 7 auction; and

6. To avoid dischargability problems with creditors that might occur in a Chapter 7 (although the 2005 changes to the Bankruptcy Code have reduced Chapter 13 filing's ability to avoid dischargability problems).

Wednesday, August 31, 2011

FAQ #11: Do I have to tell the Bankruptcy Court about cash?

Yes. In order to file for bankruptcy, all assets must be discharged. This includes cash, accounts receivable, promises to pay, the contents of a safe deposit box, etc. Bankruptcy is not a "pick and choose" proceeding. You cannot not disclose some assets and fail to disclose others. Intentionally omitting assets from your bankruptcy case may result in the denial of your bankruptcy discharge, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Monday, August 29, 2011

FAQ #10: Do I have to include all my bills when I file bankruptcy?


Yes. Every debt you owe must be completely and accurately disclosed in the documents filed to commence your bankruptcy case. Bankruptcy is not a "pick and choose" proceeding. You cannot not put some debts in and leave other debts out. Intentionally omitting debts from your bankruptcy case may result in the nondischargability of those debts, the dismissal of your bankruptcy case, fines, or imprisonment for bankruptcy fraud.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Friday, August 26, 2011

FAQ #9: Will My Name Appear in the Newspaper if I file bankruptcy?

No. While bankruptcy is a matter of public record, your name will not be published in the paper. Certain redacted records are available at the bankruptcy court, but can only be obtained in person. However, certain issues which commonly arise in the context of bankruptcy, such as foreclosure, do require the publication of a legal notice, often in the local newspaper serving the debtor’s residence.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Wednesday, August 24, 2011

FAQ #8: How much debt do I have to have to file?

The bankruptcy code places no minimum amount of debt required to file for Chapter 7 or Chapter 13 bankruptcy. When considering whether or not to file it is important not to pay attention only to the total debt figures, but also consider the debtor’s ability to repay the debt versus the potential benefits of bankruptcy, such as the automatic stay (which can prevent further collection action, stops lawsuits, halts foreclosure and can prevent repossession). In addition, in some cases, bankruptcy may successfully protect someone who owes unliquidated or contested debts – even if those debts have not been ultimately reduced to a dollar figure.

Chapter 13 places certain restrictions on the amount of debt that can be discharged. Under the current limits, a Chapter 13 bankruptcy will be dismissed if the debtor has unsecured debt greater than $360,474 and/or secured debt greater than $1,081,400 (as of April 1, 2010).

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Monday, August 22, 2011

FAQ #7: Will bankruptcy show up on a background check for a job or security clearance?

A bankruptcy filing creates a court case in the Bankruptcy Division of the Federal District Court. The existence of a court filing in any court is a matter of public record, so there will be a public record of a bankruptcy filing. However, this does not necessarily mean that the information will be easily obtainable by the general public. For example, in order to view bankruptcy case documents, one must either go to the Federal Bankruptcy Courthouse in the district where the case was filed, or have the requisite credentials to obtain a PACER account (on-line access to Federal Court records).

Third-party agencies can determine that a case was filed through various public records search engines. Credit reporting agencies (Equifax, TransUnion and Experian) are able to obtain similar information. However, the technologies to obtain wide-reaching searches for court filings (including bankruptcy) are not readily available to the general public because of their cost. Therefore, whether or not a bankruptcy will “appear” on a background check largely depends on the type and thoroughness of the background check.

Many employers simply run a criminal offender records check (commonly called a CORI check in Massachusetts), and the CORI report will not make mention of a bankruptcy. However, more involved background checks may require the evaluation of a credit report, which, if so, would mean that the bankruptcy would be visible during a background check. Background checks for compartmentalized security clearance requests (for DOD or Law Enforcement employment) will also contain financial information, including bankruptcy.

Just because a bankruptcy is visible on a background check doesn’t necessarily mean it will have an affect on the employer’s decision, especially if you have disclosed this to them already. For example, many employers, including the U.S. Military do not view bankruptcy as a basis for the automatic withholding of a security clearance.

The status of a security clearance (or the ability to obtain a clearance) can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and the recommendations provided by supervisors, co-workers, and professional references.

The employer should evaluate whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. As a practical matter, a security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don't file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk. (Source: U.S. Air Force Judge Advocate)

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Friday, August 19, 2011

FAQ #6: Can I buy a house, car or get credit cards after I file bankruptcy?

Once your bankruptcy case is concluded, there are no restrictions on property that you may own or purchase. Any property that is acquired during the bankruptcy proceeding (the period between filing and the closing of the case) must be disclosed to the bankruptcy court by amending the bankruptcy schedules, but after the discharge these limitations cease.

Similarly, you may incur new debt, however, any debt that is obtained after the date of filing is not included in the discharge. As a general rule, it is advisable to not incur any new debt or acquire any new assets until you receive your discharge from the bankruptcy court.

Once you have your discharge, just because you may borrow money or purchase assets, does not mean it will be easy. Bankruptcy filing makes it difficult to obtain the credit required to purchase these items, for some time. Because bankruptcy (and often, the financial difficulties which gave rise to a bankruptcy filing) will make it difficult to obtain credit, many people will be unable to purchase a new home or car, or obtain a credit card for a period of time after bankruptcy.

Taking steps to repair credit (such as establishing a good repayment history on reaffirmed debts or a secured credit card, maintaining a cash reserve, paying debts on time, and borrowing and repaying a small personal loan) can accelerate credit repair. If you take the proper steps to rebuild your credit following bankruptcy, you may be able to qualify for an unsecured credit card, car loan or mortgage in as little as 2 years after your discharge. Eventually, if you budget correctly and manage your credit after your bankruptcy better than before, you will be able to purchase a new home and/or car.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Wednesday, August 17, 2011

FAQ #5: Can I file bankruptcy without an attorney?

Yes. If you decide to seek bankruptcy relief, you can represent yourself in all matters connected with the bankruptcy, or you may hire an attorney to represent you. Additionally, you may hire a bankruptcy petition preparer who is not an attorney. However, a paid bankruptcy preparer may only assist you in preparing the appropriate bankruptcy forms, petitions, schedules and disclosures, and may not represent you in bankruptcy court.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Monday, August 15, 2011

FAQ #4: What does it cost to file for bankruptcy?

Court filing fees (the fees for filing your petition) for bankruptcy vary depending on the chapter you are filing under, but initially plan on $274.00 for Chapter 13 and $299.00 for Chapter 7. If you need to change your petition after it is a filed, there is an additional $26.00 filing fee.

In addition to court fees, there will be legal fees, i.e. what you pay to your Bankruptcy Attorney to analyze your case, review your purchase history to avoid non-dischargability issues (meaning you still owe money to a creditor after bankruptcy), make recommendations regarding when you should file and under which chapter, preparing your petition, schedules and disclosures, and representing you at the §341(a) Creditor’s Meeting. Each attorney offers slightly different services, and charges different amounts. You should speak with your attorney to understand his or her fee structure, and always get the fee agreement in writing.

At Kelsey & Trask, P.C. our fees are calculated based on how complicated the case is and we have provided a simple online calculator for you to easily determine the flat fee for your case.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Friday, August 12, 2011

FAQ #3: Will bankruptcy hurt my chances of co-signing for my children’s student loans?

Generally, any time a loan is applied for, the lender will evaluate the creditworthiness of both guarantors. An adverse credit history of one co-signer may result in the denial of the loan. However, the ability of a parent to co-sign their children’s loans (including student loans) largely depends on the lender and the type of loan.

For example, a parent may be able to co-sign for Stafford Loans (federally guaranteed student loans) shortly after bankruptcy, but will have difficulty co-signing a PLUS loan if less than 5 years have passed since discharge. These requirements are built into the lending structure for student loans, and reflect the individual requirements for each financing option. In other words, it depends on the loan and you should consult with a college financial aid expert or an attorney.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Wednesday, August 10, 2011

FAQ #2: If I have a co-signer, will their credit be affected?

A co-signer is an individual who is promising to repay a loan in the event the primary borrower defaults. If the primary borrower defaults (or files bankruptcy), the co-signer will be required to pay the loan back. As long as the co-signer repays the loan pursuant to the terms of the agreement, their credit will not be affected. However, many loans include an acceleration clause, meaning that if one of the borrowers files bankruptcy, the entire balance of the loan is due. If the lender exercises their right to accelerate the loan, the co-signer may not be able to make regular monthly payments.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Monday, August 8, 2011

FAQ #1: How will filing bankruptcy affect my credit?

Over the next few months we are going to post on this site the questions that our clients and potential clients ask.

Bankruptcy can be a confusing and scary process. But it doesn't have to be! At Kelsey & Trask, P.C. we work hard to makes sure our clients understand the process so they can stop the collection calls and move on with their life. If you want to move on with your life too, then take charge and get your questions answered. Check back often to find answers to the 25 most common questions that we receive, presented in no particular order:

FAQ #1: How will filing bankruptcy affect my credit?

Put simply: filing bankruptcy will hurt your credit. According to the credit reporting service freecreditreport.com, your credit score (FICO Score) will decrease between 85 and 105 points if your credit is poor, and between 140 and 160 points if your credit is good or excellent. While this seems significant, for most consumers, this is not significantly worse than a missed credit card payment, which, even if it happens once, can lower your score between 60 and 80 points for poor credit, and 90 to 110 points if your credit is good.

The fact that you filed for bankruptcy will appear as a “public records” entry on your credit report for up to 10 years, and individual debts that were discharged in bankruptcy will remain on your credit report for 7 years after discharge. The discharge date is different depending on the type of bankruptcy you file. In a Chapter 7 case, your discharge is granted approximately 5-6 months after filing; in a Chapter 13 case, your discharge is granted between 3 and 5 years after filing, depending on your plan terms.

However, if you take the proper steps to rebuild your credit following bankruptcy, you may be able to qualify for an unsecured credit card, car loan or mortgage in as little as 2 years after your discharge.

If you don't see your question and would like more information please do not hesitate to call us at 508.655.5980, e-mail us, or attend one of our weekly Free Debt Relief Clinics.

Wednesday, August 3, 2011

Do I have to report loans that I Co-signed for in a Bankruptcy?

In bankruptcy you are required to disclose all of your assets and liabilities. A loan that you co-signed for is a liability. Even though you may never be asked to pay the loan, if the primary borrower makes all necessary payments, you are still liable for the loan and must report it.

When you file for bankruptcy you are required to disclose if any of your debts have co-debtors, as well. A co-debtor is someone who also agreed to pay that debt, in this case the primary borrower. Even if the debtor is discharged of their obligation for a debt, the primary borrower will still owe the debt.

In many cases, the filing of bankruptcy of one of the borrowers, even a co-signor, will constitute a default on the loan and the creditor can then accelerate the loan against the primary borrower if the debtor does not reaffirm. Accelerating the loan means that the lender requests full payment or in the case of a mortgage, forecloses. Despite this ability, in most cases lenders will not accelerate a loan, but will allow it to remain under the current terms if the primary borrower continues to make timely payments.

If you are a primary borrower on a loan and the co-signer is filing for bankruptcy, you should consult with an attorney about what your rights and obligations may be. It is important that you at least find out whether or not the co-signer intends to reaffirm their obligation to the creditor or whether you will be left owing the full amount yourself.

Tuesday, July 12, 2011

Chipping Away at the Defense of Marriage Act: Is a Joint Petition for Bankruptcy on the Way in Massachusetts for Same-Sex Married Couples?

UPDATE: On June 26, 2013, the Supreme Court of the United States declared in United States v. Wilson, that section 3 of DOMA (the "defense of marriage act") is unconstitutional.  Read our analysis of what this changes: SCOTUS decision on DOMA affects Joint Bankruptcies

ORIGINAL POST:

The Defense of Marriage Act (DOMA) dictates how federal law treats same-sex marriages, by defining marriage as between one man and one woman. DOMA does not forbid states from allowing same-sex couples from marrying, but does limit same-sex married couples from accessing the same federal benefits afforded their opposite-sex counterparts.

There are over eleven hundred federal statutory provisions in which marital status is a factor in determining or receiving benefits from the federal government.  For example, DOMA prohibits a same-sex married couple from filing a joint federal income tax return.

In the field of bankruptcy, DOMA not only forbids a same-sex married couple from filing a joint petition (thereby saving hundreds of dollars in filing fees, as well as losing some of the ease of joint financial planning by dealing with joint debts together), but it also prevents a spouse's or former spouse's claim against the petitioner from being given priority (basically, a debt held by a spouse or former spouse in an opposite-sex marriage is treated as a more important creditor to be paid off, where a same-sex spouse or former spouse is treated as a less-important creditor to be paid off).

In California, a same-sex married couple tried to file a joint Chapter 13 petition for bankruptcy. When the bankruptcy trustee moved to dismiss their petition because of their marriage, they appealed, and the Bankruptcy Court for the Central Division of California ruled that denying the couples' petition violated their equal protection rights guaranteed by the Fifth Amendment. Interestingly, the opinion was signed by twenty of the twenty-four judges in the Central District of California, although the case was heard only by Judge Thomas B. Donovan, sending the message that the bankruptcy judges in the Central District of California believe (well, most of them at least) that the application of DOMA to prevent a same-sex couple from filing for bankruptcy is unconstitutional.

This does not mean that other states will have to follow suit. However, a case in New York was decided along the same lines, and one can only assume that other states will begin to address the issue. Massachusetts has not yet dealt specifically with the issue of same-sex married couples filing a joint petition for bankruptcy, although two separate cases in Massachusetts federal court have ruled that DOMA is unconstitutional.

Kelsey & Trask, P.C. understands that not everyone wants to be a constitutional test case, and for some, operating within the restraints of the law, no matter how unfair, is better in the short term than changing the legal thinking of an entire system. We recognize the limitations and restrictions presented by DOMA. While we cannot extend all benefits of a joint filing, we do recognize and support the same-sex community.

If you need assistance in the bankruptcy court, we will not charge you as separate clients; rather, we will charge the same fee as we would any married couple. We will also do our best to ensure your cases are presented to the same trustee, and remain in front of the same Judge, by filing them simultaneously (giving them the best chance to be in front of the same trustee and Judge).

Joint filings were created in order to protect the family unit and allow for collective financial planning. While federal law currently chooses to deny same-sex married couples from such federal benefits, we have chosen to treat same-sex married couples with the same dignity and treatment as their heterosexual counterparts. It is not a perfect solution, but if it helps your family to get a fresh start, we don’t want you to go alone.


Friday, July 8, 2011

Calm Down for a Second: My $.02 on the Casey Anthony Verdict

Please allow me to go off topic for a minute. It’s Friday, after all.

This week, the jury in the Casey Anthony trial decided that the prosecution did not meet its burden in establishing, beyond a reasonable doubt, that Casey Anthony was responsible for the death of Caylee Anthony. I am not going to provide my own insights as to why the jury decided the way they did, or whether the prosecution or the defense presented their cases in an effective and appropriate manner. The jury has rendered its verdict, and the judicial system has functioned as designed.

The fallout of the jury’s verdict has been as varied as the issues raised at trial. Some have come out in support of the defense and Casey Anthony, others have criticized the prosecution for their inability to secure a guilty verdict on the murder and/or manslaughter charges. Cable news pundits will continue to discuss the implications of this case for days or weeks to come, and the ratings bare out the ongoing interest in this case. Whether you agree with the jury and the outcome, or believe you would have voted differently if you were one of the twelve, there is plenty of room for analysis and reflection. Discourse and discussion are healthy and should be encouraged.

However, I have heard and read growing criticism of “the legal system” from the many people that believe the jury “got it wrong”. Some of the more disturbing comments have been along the lines of death threats, calls for sterilization, or calls for others to kill or injure the accused. Some people are going so far as to levy threats and calls for harassment against the jurors themselves.

More unsettling are calls for a complete overhaul of the legal system to eliminate the “beyond a reasonable doubt” standard required for criminal convictions on a case-by-case basis. Essentially, such calls would allow the government to arbitrarily reduce the standard required to convict someone accused of a particularly reprehensible crime.

I understand that people are angry, and these calls for reform will undoubtedly gather no legislative traction. However, I believe that we all need to take a step back and recognize that our system, although imperfect, is designed to place a burden on the government to prove their claims before we are stripped of any of our individual freedoms. Calling for a reduced standard, or advocating for the death or injury of the acquitted undermines the concept of “innocent until proven guilty” that has been the cornerstone of our criminal justice system since the Bill of Rights was ratified in 1791. In the words of one of our founding fathers:

They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety” – Benjamin Franklin


Friday, July 1, 2011

Staying out of Financial Trouble: Let the Joneses Do Their Own Thing

This planet has — or rather had — a problem, which was this: most of the people living on it were unhappy for pretty much all of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn't the small green pieces of paper that were unhappy. - The Hitchhiker's Guide to the Galaxy
Everyone has heard the expression "Keeping up with the Joneses". Many of us consciously or subconsciously compare ourselves to our peers, and use the transfer of wealth (i.e., buying the things that impress others or help us fit into a particular social circle) to keep us happy in our own peer group.

As you are considering a financial reorganization through a debt payment plan or bankruptcy, it is important to identify the risks that will derail your efforts, or worse yet, put you back in the same place you were in prior to bankruptcy or debt relief. One hidden trap is pressure to "keep up with the Joneses" or engage in "retail therapy". While it may be difficult to completely curtail your spending in some of these areas, a recent Bankrate.com article "Are Your Friends Making You Broke" discusses some ways to identify harmful spending habits and suggests some useful alternatives.

Some suggestions:

1. Remember your true friends want what's best for you. Discuss your financial goals with them to alleviate some of the social pressures.

2. Consider the long-term costs and expenses of that expensive new item you have your eye on.

3. Suggest less-expensive alternatives when asked to participate in an activity you cannot truly afford.

4. Consider alternative products and technology that will give you the convenience and functionality, but at a fraction of the price. Sure, GPS-enabled smartphones are great, but asking for directions or a trusty map will get you there too.

Getting and staying out of debt isn't easy, but it can done if you stick to a plan. If you need help working out a plan, the debt relief attorneys at Kelsey & Trask, P.C. are always ready to help.

Tuesday, June 28, 2011

Paying for Debt That isn't Yours: Facts and Figures on Identity Theft

Somewhere between 9 and 11 million Americans are victims of some type of identity theft every year, with total losses over $50 billion. These victims are not just the result of sloppy online habits; even standard day-to-day practices like paying by check, mailing documents or improperly disposing of financial documents creates the risk of identity theft.

According to a recent NakedLaw by Avvo report, the threat of identity theft (and the financial risk associated with such theft can be mitigated by simple practices, such as password protection for electronic information, shredding personal documents, and keeping an eye on your credit report regularly.

For the whole story, please read the full NakedLaw article: Is the Threat of Identity Theft Overblown?

Whenever you are working to clean up your financial future, you always must be proactive about avoiding future risks, in addition to correcting past mistakes.

Friday, June 3, 2011

We're Moving!

On Thursday, June 9, 2011 and Friday, June 10, 2011 the offices of Kelsey & Trask, P.C. will be closed while we relocate to our new office. On Monday, June, 13, 2011 Kelsey & Trask, P.C. will open its doors at a new location conveniently located on the Framingham/Natick border near the Mass Pike (Exit 13), Rt. 30, Rt. 9, Rt. 27 and Rt. 126.

Kelsey & Trask, P.C.'s new address is: 160 Speen Street, Suite 202, Framingham, MA 01701.

Our telephone, (508) 655-5980, and fax number, (508) 655-5981, will not be changing.


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Wednesday, June 1, 2011

What hurts your Credit Score and should you care?

The Infographic provided below is helpful, at a glance, in understanding the ways that certain negative events can affect your credit score. This information is most useful for those people who already have good scores, because it tells you what to avoid to keep your score high.

But what if your score is already damaged by missed payments and other issues (foreclosure, debt settlement, etc.)? Should you care about your score?

NO

That answer may surprise you, but in our experience people are more concerned with their credit score than with more immediate present issues. Your credit score is important in that it can affect your ability to obtain loans, mortgages, credit cards, and other financing. But if you are already missing payments on your current debt, then this is not the time to worry about future financing. In other words, your credit score isn't as important as the information on your credit report. Fixing the problems on your report will lead to a good score.

So before you can worry about your score in the future, you must first get your house in order. What we tell our potential clients, in our 1-hour consultation, is that they need to set a realistic budget, whether or not they decide to file for bankruptcy. Even when you have significant debt but believe you can work your way out, you will need a realistic budget to make that happen. Until you can manage your current debt, you should not be worried about borrowing more.

Similarly, if you file for bankruptcy, you need to take steps to make sure you don't end up back in a position where you can't pay your debt. As you would expect bankruptcy is one of the worst things that can happen to your credit score. But if you are in a position to go bankrupt, your score has most likely already been significantly affected by your existing debt.

DISCLAIMER: This infographic is provided by freescore.com as an advertisement. We have reproduced it here because it contains useful and interesting information, however we do not endorse or claim any knowledge of freescore.com. We recommend that all of our clients and potential clients obtain their credit report as soon as possible. While you may choose to purchase a credit monitoring service (freescore.com, freecreditreport.com, etc.), you can obtain your credit report, once every 12 months, at annualcreditreport.com without any cost, trial membership or other enrollment. You also have a right to obtain your credit report directly from each of the three credit bureaus by writing to them directly.

What Hurts Your Credit Score?
[Via: FreeScore.com credit score]

Friday, May 27, 2011

What happens in a Bankruptcy to the property that is not exempt?

The Bankruptcy property exemptions in Massachusetts recently changed to protect considerably more property of individuals from their creditors. When filing for Chapter 7 Bankruptcy this "exempt" property of the debtor is not included in the Bankruptcy estate, which means that it is not subject to being taken by the Trustee and used to pay your debts. In simpler language, exempt property is property you get to keep.

But what happens to property that isn't exempt?

If you file for bankruptcy and property that you own exceeds the exemptions then you have technically surrendered that property to the Trustee upon filing. In other words, by asking the Bankruptcy Court to help you with your debts, you have agreed to give them your property as well. The property that is not exempt is considered part of the Bankruptcy Estate and in a Chapter 7 Bankruptcy this property will be used to pay your creditors proportionally to the amount of debt they are owed.

If the non-exempt property is liquid funds (such as a bank account) then you will be forced to pay these funds to the trustee who will then take a percentage for their fees and pay the rest to the creditors. If the non-exempt property is non-liquid, such as a car or jewelry or a house, then the trustee will auction the property and use the proceeds of the auction to pay their fees and pay the rest to the creditors.

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