Massachusetts Bankruptcy Blog

There are a multitude of reasons why a consumer may choose to file for either Chapter 7 or Chapter 13 bankruptcy protection.  Most of these are good reasons and by discussing your situation with a debt relief attorney licensed in your state, the bankruptcy will generally help relieve the financial stress or even protect against loosing property.  Below is a list of the top ten reasons that I as a Massachusetts bankruptcy lawyer have found to drive people to file for protection under Title XI, the bankruptcy code.

1. Credit card bills are out of control:  Many people have found themselves in the unfortunate position of owing more money to their MasterCard, visa, discover and American express then they will ever be able to pay back.  This is not to say that the consumer was irresponsible, or went on spending sprees.  Many times it is due to outrageous interest rates, or the temporary loss of income which led the need to use a credit card much more frequently then one traditionally would do so.  If this is the case, all of that credit card debt, would be considered unsecured, and can be discharged in a chapter 7 bankruptcy case.
2. The loss of a job or severe illness – Similar to the #1 reason for filing bankruptcy, that is, credit card balances being too high, the loss of a job or being sick for a prolonged period of time may be making it very difficult to stay current with normal living expenses.  Unfortunately not being able to pay your bills, tends to lead to abuse or at the very least over use of one’s credit cards.
3. Fallen behind with mortgage payments – In such an unstable economy as we are seeing, when a consumer looses their job or can not earn money for a period of time, very large bills such as mortgage payments, tend to fall by the waist side.  The problem is that once you miss a couple of these payments, it is very difficult to catch up on your own.  The bank in fact does not need to accept partial payments and can accelerate your mortgage and demand full payment if you miss even one month.  A chapter 13 bankruptcy can save a consumer’s home, if mortgage payments are in arrears.  Under this section of bankruptcy, a consumer can pay back their missed payments stretched out over sixty (“60”) months interest and penalty free.  Often this option is far better then trying to modify a loan, where there is no certainly guarantee in the modification, but there is one with a Chapter 13 repayment plan.
4. A foreclosure is scheduled – The natural consequence to falling too far behind on mortgage payments is that the bank can take a consumer’s home back, by selling it at a foreclosure sale.  If a sale is scheduled, filing a bankruptcy will enact something called the automatic stay, which will stop a foreclosure sale dead in its tracks.
5. A repossession of a vehicle is scheduled – Just as the automatic stay, pursuant to 11 U.S.C. § 362 will stop a foreclosure sale; it will also stop a repossession of a car or any other collateralized property.
6. The value of a property is less then the mortgages owed – Many homeowners and investment property owners have found over the past few years that as real estate values have declined, the fair market value of their properties is far less then that of their mortgages.  In some situations, an equity line, or second mortgage may be wholly unsecured, due to the fact that if a foreclosure sale ever did occur, the bank would not get all their money back.  If this is the case, there is a provision in a Chapter 13 bankruptcy, where you can strip an entire second mortgage from your property, and if you have an investment property, you can cram down the value of the mortgage to its actual market value.
7. A loan modification was denied – Many consumers have found themselves in a bad situation due to attempting loan modifications.  Often times, they have been advised to stop making mortgage payments, so that a loan modification can go through.  Additionally home owners who were in trial plans, but were subsequently denied, have been told that due to their lower temporary payment, they are now in default.  If this has occurred, the chapter 13 reorganization plan will allow the homeowner to catch up over time.
8. More time is needed to negotiate with a mortgage company – In some situations, homeowners has fallen behind a significant amount and is trying to workout a loan modification, however, the process is taking too long, and foreclosure sale is scheduled.  If this is the case, filing a bankruptcy and enacted the automatic stay is enough to buy the additional time to complete the modification.
9. A divorce has increased debt load, while decreasing income – Just as when a consumer looses a job or becomes sick, when two people get divorced, household income tends to decrease substantially.  In addition to this, often times the total debt load is not separated equally, and one spouse can not pay everything but themselves.
10. Remove a lien or attachment from your real estate – Just as a second mortgage or equity line can be stripped off a property as secured, a judicial lien can also be stripped from the real estate if it can be proven that no equity exists in the property to satisfy the lien.

The forgoing top ten list was drafted by Attorney Michael Goldstein, who practices debt relief and bankruptcy law in Massachusetts.

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Once you file a chapter 7 or 13 consumer bankruptcy case, the court will schedule your Section 341, Meeting of Creditors. In most cases, this will be the only time you actually have to attend a court procedure. The good news is that this does not take place in a court room, but rather is much more relaxed, as it is a meeting in a conference room. I have found as a bankruptcy lawyer, that my clients, tend to get very nervous with the prospect of going to court, and when they find out it is not in that traditional setting, their anxiety is reduced a bit.The meeting of Creditors is really an opportunity for the bankruptcy trustee to ask a few questions to ensure everything on your petition is accurate and that you have disclosed all of your assets and liabilities. Additionally, this gives your creditors a chance to come and ask questions about your debts. However, very rarely does a creditor actually attend. Typically, they will only attend if they believe you obtained the loan or credit line from them through fraudulent means or by making misrepresentations of your income and ability to pay back the debt. The other time a creditor will come to the meeting is if you have not filed your taxes. The IRS and state department of revenue will sometimes come to ask when you will file your taxes. It should be noted of course that filing all taxes is a prerequisite to obtaining a bankruptcy discharge.

The meeting itself is usually pretty quick, anywhere from 1 – 5 minutes. Typically it starts with providing the Trustee your driver’s license and social security card, and being sworn to testify truthfully. The Trustee will then show you a document you signed, and ask if that is your signature, if your read and reviewed everything first and if everything on your schedules and statements is true and accurate? Next you will be asked to explain how you got into financial difficulty and then the Trustee may ask a few questions just confirming information on your schedules. Presuming you have no assets the Trustee can liquidate, and that you have prior to the hearing sent over your last few paystubs and tax returns, the Trustee will conclude the meeting, and you will be on your way.

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The median income for the Commonwealth of Massachusetts has been updated as of November 1, 2011.  This new number has a direct correlation as to whether a consumer qualifies to file a Chapter 7 bankruptcy, and discharge all of their unsecured debt or if a consumer must file a Chapter 13 case which is a reorganization with the need to propose a payment plan to the court, based upon the B22 form filed with every bankruptcy petition.

The new stated median income for Massachusetts based upon family size is a follows:

Family of one              $53,496

Family of two             $64,174

Family of three            $80,337

Family of four             $99,067

Family of five             $106,567

For family sizes larger, add an extra $7,500 per family member.

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Accidents do happen, sometimes they occur on a jobsite, and you can make a claim for workers compensation.  Sometimes, an injury can occur as a result of a slip and fall or car accident and an insurance company may eventually pay for your time away from work; Sometimes, you may even be hurt for so long that you can not work any longer and may have a right to open a social security disability claim.  However, in all of these situations, the issue many injury victims face is that at least for a short time, if not for many years, you may be out of work, not earning a pay check and unable to pay your mortgage, credit card bills or even basic living expenses.If you are hurt and can’t pay your bills, what rights do you have?   There are many rights consumers have.  However, let’s talk about the possible solutions to your debt problem.  If you are being harassed by debt collectors and you do not wish them to call you any longer or send you harassing letters, all you need to do is inform them the next time they call that they can not contact you any more, pursuant to the fair debt collections practices act.

In addition there are specific state laws, such as those in Massachusetts (M.G.L. c 93 § 49) which make it unlawful to engage in certain debt collection practices that are considered unfair, deceptive or unreasonable.  The following types of collection attempts would be considered unfair, deceptive or unreasonable:

1. A person trying to collect a debt informs you verbally or in writing they will communicate or discusses an alleged debt to someone else other than you, in order to persuade you to pay them.
2. A person trying to collect a debt communicates directly with you after notification from an attorney representing you that all further communications relative to the debt should be addressed to the lawyer.
3. A person trying to collect a debt communicates with you in such a manner as to harass or embarrass you, including, but not limited to communication at an unreasonable hour, with unreasonable frequency, by threats of violence, by use of offensive language, or by threats of any action which the creditor in the usual course of business does not in fact take.
4. The creditor communicates with alleged debtors through the use of forms or instruments that simulate the form and appearance of a court.

It is also deemed unlawful under Massachusetts law and a violation of the debt collection laws for a Creditor to threatening that nonpayment of a debt will result in:

1. You will be arrested if you do not pay the bill
2. Suggesting that they can garnish your wages or attach any property without informing you that a court hearing will be required first and a Judge will have to rule on the matter.
3. Using profane or obscene language in an attempt to intimidate you to pay a debt.

The bottom line is this, don’t let debt collectors push you around, you have rights as a consumer, and debt collections companies may not want to admit it, but they know it too.

This article on consumer rights fair debt practices was written by Attorney Michael Goldstein, a consumer debt advocate and bankruptcy attorney.

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One of the pressing questions that many business owners have while facing the prospect of closing their doors and ceasing business operation is how to satisfy their debts.  In most cases, businesses fail due to a very limited set of factors.  I have found that the most significant factor after the lack of business sales is the inability to collect accounts receivable from services or products already sold.In many cases, part of the decision to cease operations also involves filing a Chapter 7 corporate bankruptcy.  When a business files a Chapter 7 bankruptcy case, there are certain requirements incumbent upon the business, such as listing all of the company’s assets as well as liabilities.  The main reason for listing of the assets, other then to disclose to all creditors what the business holds, is that the  Trustee of the bankruptcy estate has the right to take possession of assets and liquidate them in order to pay off the businesses’ creditors to the extent funds are available.  However,  in some  situations, the Trustee will decide that it is not worthwhile to liquidate assets.  The Trustee may decide that it will cost more money to liquidate then he or she may generate.  The Trustee may also decide that chasing after bad debts is simply going to take too much time and not result in positive cash flow that he or she can use to pay off the creditors.

In order for the bankruptcy case to be complete, the Trustee must file a final report with the court, either stating he or she has liquidated assets, or that he or she is abandoning the assets and has neither received any property nor paid any money on account of this estate.   Section 544(a) of the Bankruptcy Code allows the trustee to abandon any property of the estate that is burdensome to the estate or is of inconsequential value and benefit to the estate.  As I said before, sometimes a Trustee simply abandons his or her right to property.

So what happens if the Trustee makes the decision not to go after old accounts receivable and in fact abandons those particular assets?  Your company has ceased operations and the bankruptcy has effectively closed the business forever.  Yet there are companies or individuals out there, who still owe money to products or services received.  Who now has the right to try and collect those debts?  What can happen now is that the business owners do have the right to try and collect.

The follow up question though, which occurs more then you might think is when a business files a Chapter 7, often the business owners also file their own personal bankruptcy case with it.  So what now happens if you can collect on some corporate debt which becomes a personal asset?  The analysis to this question is the same as what if I file bankruptcy and then win the lottery.  Personally, you have an obligation to inform the court of your win fall, if this occurs with in 180 days of filing of a personal bankruptcy petition pursuant to Section 541 of Title XI.  So the bottom line is you still may loose some of the collection, if you receive funds with in 180 days of the owner filing for personal bankruptcy, but you may also keep it, depending on the specifics of the owner’s personal finances.

This article was written by Michael Goldstein a Bankruptcy lawyer who practices in Eastern Massachusetts

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One of the biggest questions I get asked by consumer debt clients is whether they can be fired if their boss finds out they file bankruptcy. The key to remember is their is a Federal law which protects your employment from just such a practice.

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 Being unfathomably deep in debt can be a truly frightening experience. When you are so far in the hole that you can barely see the light at the other side, sometimes your better senses lose you. Not only do you feel continuously anxious, you have so many bills that it’s hard to even add up, regardless of the dire conditions.

In times like these, it’s best to take a deep breath, and consider your options. Bankruptcy can definitely be a valid option for extreme cases, but it is definitely possible to fight off debt with good budgeting, smart business decisions, and even more meticulous budgeting.

Consider a Low Cost Startup Business

While even a small business startup takes at least a modest amount of premium to pave its way, it’s something to consider. It may be less expensive to start a business than you might think. Have any skills or hobbies you’ve been quietly developing? Well, now is perhaps the defining moment to put your skills to the test. Creating a website is an extremely cheap way to reach clients; you could even monetize a blog about your experiences with debt or your hobby.

Look Into Balance Liquidation Plans
 

If you have more than a few credit cards with outstanding interest rates and payments, you should ask your creditors about balance liquidation plans (BLP). What a BLP does is void your credit card (so it is no longer usable) and in turn reduces interest rates as low as 5%, or in some cases 0%.
 

Different credit card issuers have different requirements for BLPs although most require a delinquent account or some form of late payments to consider you. Best of all, BLPs usually only show up on your credit report as a consumer closed account instead of a bank closed account; definitely ask your credit card issuer questions about interest rate reduction, payment plan length, and how it will appear on your credit report before applying.
 

Set a Rigid Budget in Cash
 

If you happen to liquidate your accounts, setting a rigid budget in cash would be a an excellent followup because you won’t have any more credit to spend. To budget with cash, simply withdraw a set amount of cash each week, and only spend the cash you withdraw. Don’t take out anymore cash until the next week. This literally doesn’t let you overspend. If you get low on cash in a week, start looking for food in your freezer and cut back on luxuries or even driving.
 

Organize Budgeting with Envelopes
 

A great system for organizing your rigid cash budget is to use separate envelopes containing the cash for each budget. You can designate a set amount of money in each envelop for bills, groceries, gas, and anything else you need to budget. If one of the envelops empties way too soon, you have identified a potential spending problem (or budget overestimation) in your finances.

Author Bio:

Stella Walker is a freelance writer of free credit score where she writes about topics including credit, debt, investment, bankruptcy.

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Many consumers may not realize that ignoring their credit card bills can have much larger ramifications then simply bad credit.  Recently in Massachusetts as well as many other states, credit card companies and other unsecured creditors have been fighting back, although in many cases unlawfully, by taking possession of their customers cars and trucks, selling them and applying the funds to the past debt on the credit card bills.  The problem with this is that in many cases, these creditors are sidestepping the procedure and rules in order to satisfy a debt.How did this happen to me?  That’s the questions people have asked after the fact.  Well, consumers do bear some of the responsibility.  If and when you find yourself unable to pay your credit cards, you must be vigilant in checking your mail.  A creditor may file a law suit and if you don’t answer it in a certain period of time (21 days in Massachusetts), the Creditor will get a default judgment against you.  Once that happens you are already behind the eight ball.

If a creditor does get a judgment, they can not just come and take your car though.  They must ask permission of a judge.  The problem for consumers though is that if you are ignoring the complaint filed, you have not defended yourself against the debt.  A debt that quite frankly you may or may not even own to the creditor who filed the law suite.  What some sneaky creditors will even do is at the time they ask for the default, will ask for permission to take your car.  Since you are not there to say anything in your defense, the judge may just grant the creditor’s request.  However, even if this does happen to you, you may still have rights, and the creditor may have not followed all of the rules in your state.

The biggest defense that consumers have is that they can shift the burden from themselves to the creditor.  What I mean by this is that the Creditor MUST prove that you actually owe them and not some previous creditor the debt.  They must be able to demonstrate they have the original paperwork you signed in many case.  This is called demonstrating they are a holder in due course.  Many of these unscrupulous creditors will buy millions of dollars in debt in a bulk transaction.  What this means is that they may not have actually reviewed their file to make sure your specific paperwork was in the batch.  If they do not have it, you may be able to go into court and force them to give you your car back and may even be able to set aside the judgment.  The Creditor, even if they own the debt, may have waited too long to get a judgment.  In each state, there is a statute of limitations on how long a creditor has to obtain a debt.  Finally, in each state as well as under various Federal laws such as the Federal Debt Collections Practices Act, there is a requirement to provide proper notice to you by mail, in some cases proof of delivery is required.

The most important thing to do if you find yourself owing a credit card or any other debt is to deal with it before the situation gets out of hand and a suite is filed.  However, if a suite is filed, you should seek out the advice of a lawyer in your state who handles consumer debt matters.

The foregoing article was drafted by Attorney Michael Goldstein with assistance from Attorney Mari Mckeon

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