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Fort Worth Bankruptcy Blog
Archive 2005 to 2008


December 1, 2008 - U.S. Courts Release New Official Federal Bankruptcy Forms


All bankruptcy case filed on or after December 1, 2008 must use the new Federal Bankruptcy Forms. Attorneys and other filers should update their forms to be in compliance.


October 17, 2008 - Today Marks the 3rd Anniversary of the "New" Bankruptcy Law


The "new" bankruptcy law took effect three years ago today. In that time, the bankruptcy world has struggled to adapt to the radical new changes. The additional paperwork requirements and increased costs have been burdensome to new clients. However, bankruptcy remains a viable and available option to those who need a helping hand to get their lives back on track.


September 29, 2008 - Economic Meltdown May Educate Public About Bankruptcy


The current economic meltdown has many people realizing that bankruptcy doesn't primarily happen to irresponsible people, but to good people who've had a catastrophic event (major illness, foreclosure, job loss) happen to their family. The undeserved stigma of bankruptcy, while significantly lower than in decades past, continues to persist. The current crisis may help the public realize that bankruptcy is a last resort that good people use protect their families, not a first resort used by the financially irresponsible.


August 3, 2008 - Bankruptcy Law Becoming Even More Specialized


Since the new bankruptcy law went into effect in October 2005, bankruptcy law has become an increasingly specialized field. Many attorneys who in the past did an "occasional bankruptcy" are no longer willing to do so given the increased complexity of the law. Those attorneys who do not primarily work in the field of bankruptcy law but continue to "dabble" in bankruptcy cases are potentially placing their clients at a significant disadvantage. Clients seeking bankruptcy help should always ask any potential attorney what percentage of their caseload is bankruptcy related.


July 22, 2008 - Many Credit Union Members Unaware of Risks Associated with Cross Collateralization Clauses

Cross collateralization is where a piece of property acts as collateral for more than one loan. Example: You borrow money from a credit union to purchase a car. The car acts as collateral to secure your repayment of the car loan. If you do not make your car payments the credit union can reposes the car. Let's say that in addition to your car loan you have a credit card with that same credit union. If the credit card is cross collateralized with the car loan then the credit union can reposes your car if you don't make your credit card payments, even if you are current on your car payments. This is a common contract provision when dealing with credit unions.


June 11, 2008 - Waiting Until The Last Minute To File Bankruptcy May Do More Harm Than Good


Waiting until the last minute before seeking help may cost you thousands of dollars. Example: You get a $40,000 home-equity loan to "consolidate your bills" and pay off your credit cards. You then have trouble paying both your mortgage and your home-equity loan. If you file bankruptcy now you will probably have to repay every penny of that $40,000 or lose your house. The credit card debt, however, could have been completely eliminated in bankruptcy. Speaking with an attorney earlier in the process could have saved you $40,000!! This exact situation may not apply to you, but speaking with an attorney as soon as you suspect you're in trouble will let you make informed decisions and could save you enormous amounts of money.


May 19, 2008 - Bankruptcy Can Positively Impact Children


Generally speaking, bankruptcy can greatly benefit children whose families file for bankruptcy. Bankruptcy can allow parents to start saving money for college instead of paying high-interest credit cards. It can remove the stress of bills from your family life. Bankruptcy can give you enough cushion in your budget so you don't have to choose between which necessities to eliminate. And bankruptcy can teach children that if you've tried your best to solve your problems, but haven't met with success there is nothing wrong with asking for help.


April 8, 2008 - Repaying A Loan To A Family Member Prior To Bankruptcy May Backfire


A preference payment is when a bankruptcy debtor, prior to filing bankruptcy, pays one creditor ahead of their other creditors. If this payment is within a certain time period period prior to the bankruptcy the bankruptcy trustee can sue the creditor and recover that payment. The rational is that one creditor should not get "preference" over the other creditors and that all creditors should share equally according to the priority level of the debt owed to them. Some clients may mistakenly believe that they should repay a family member or friend a debt prior to bankruptcy in order to protect that relative or friend. This could end up having the exact opposite result. You should consult a competent bankruptcy attorney for advice on how to proceed prior to repaying a friend or relative.


March 12 2008 - Clients Looking Into Bankruptcy Should Be Aware of "Bankruptcy Mills"


"Bankruptcy Mill" is a term used to describe some high-volume bankruptcy law firms that provide very little client service. These types of law firms often force clients to deal with secretaries and paralegals instead of allowing them to interact with attorneys. A bankruptcy mill may charge a lower price than other attorneys to entice clients to retain them. They then make up for the money they lost by providing a significantly lower level of service. They may also try to shoehorn all cases into a certain framework to increase how efficiently they can handle their cases. This approach may shortchange many clients because the specifics of their individual case may be overlooked or mishandled in an effort to increase profitability.


February 4, 2008 - Bankruptcy May Have Little Impact on Security Clearances For Most Debtors


Some individuals who are thinking about filing bankruptcy are concerned about what impact the filing of a bankruptcy case will have on their security clearances. This is a common concern for those in the military and national security fields. It is likely that bankruptcy would actually have a positive effect on obtaining or keeping one's security clearance. After all, someone who is drowning in debt is more likely to be tempted to sell secrets to the enemy than someone who's debt has been eliminated or brought under control in a bankruptcy proceeding.


January 14, 2008 - Dallas and Fort Worth Rank High In Survey of Cities With the Most Personal Debt


A recent survey ranked 100 U.S. cities by levels of personal debt. The city with the least personal debt was Billings, MT (#1 on the list) and the city with the most personal debt was Las Vegas, NV (#100 on the list). Fort Worth, TX ranked as #86 and Dallas, TX ranked #84. The reasons why people in Dallas and Fort Worth have such high levels of personal debt was not apparent from the survey, but people in both Texas cities have very high debt levels compared to the rest of the country.


December 1, 2007 - New Federal Bankruptcy Forms Take Effect


Effective December 1, 2007, new bankruptcy forms are required in all bankruptcy cases. Cases filed using old forms may be dismissed by the courts if the error is not correctly in a timely fashion.


November 18, 2007 - Sub-Prime Mortgage Crisis Sure to Increase Bankruptcy Filings


The epidemic of bad sup-prime mortgage loans will surely cause an increase in bankruptcy filings in the near future. Bankruptcy still remains a good option for those suffering from the consequences of bad sub-prime loans and in many cases can be the path back to a solid financial future.


October 15, 2007 - Means Test Values Updated


For all bankruptcy cases filed on or after October 15, 2007, debtors will be required to use updated Census Bureau figures. These figures determine the appropriate median household income to be used in the Median Income Test and the Means Test.


August 30, 2007 - Mortgage Meltdown Will Likely Lead To More Bankruptcy Filings


The news has been riddled lately with stories about how the sub-prime mortgage industry is collapsing and how potentially millions of homeowners may soon find themselves in foreclosure. This is not news to most bankruptcy attorneys who have been warning people for years to stay away from adjustable-rate interest-only mortgages that have been targeted at financially unsophisticated lower-income home purchasers in recent years. This increase in foreclosure rates will in all likelihood lead to an increase in bankruptcy filing rates nationwide as people struggle to keep their homes in the face of these unfair and predatory lending practices by the sub-prime mortgage industry. Some are proposing that the federal government step in to ease this crisis. This, however, appears unlikely to occur. Even if the federal government does nothing, the safety net of the bankruptcy courts is still available to help struggling families attempt to get back on their feet financially.


August 2, 2007 - Terms Used to Describe Motions Relating to the Bankruptcy Automatic Stay Can Be Confusing For Some Debtors


The filing of a bankruptcy typically triggers a type of restraining order called an automatic stay. This stay prevents creditors from trying to collect a debt or take other actions such as a foreclosure without first seeking formal approval to do so from the bankruptcy court. When a creditor does seek permission from the court to proceed forward they must file a motion. These motions are filed under various different names such as a Motion to Lift Stay, Motion to Lift Automatic Stay, Motion to Modify Stay, Motion to Modify Automatic Stay, and many other variations. These variations can be confusing to those unaccustomed to reviewing bankruptcy filings. However, they all mean basically the same thing: that the creditor wants permission to continue their collection, foreclosure, or other remedies.


July 18, 2007 - Many Potential Debtors Mislead By The Bankruptcy Experiences Of Friends and Family


Potential bankruptcy debtors are often mislead about what their experience in bankruptcy will be like because they mistakenly assume that it will be similar to those of friends and family members who have already been through the bankruptcy process. The experiences of others in bankruptcy are often a poor indicator because every bankruptcy case is so different. Even minor differences in the case can have major effects. For example, in some states it is not uncommon to lose homes, cars, and personal belongs in a bankruptcy. However, in a state like Texas almost no one loses property in bankruptcy because of the generous exemptions provided in Texas that are unavailable in other states. Even within the same state, factors such as the type of debts you owe and which chapter of bankruptcy you file under can radically change your case. The best solution to this problem is to seek out the advice of a competent bankruptcy attorney who can provide you with an individualized assessment of your case.


July 7, 2007 - Paying Back Family Members Prior To Bankruptcy Can Cause More Harm Than Good


Many people would like to pay back family members for personal loans prior to filing a bankruptcy. This, however, can have the opposite effect that the debtor desires. Paying a loan back to a family member prior to a bankruptcy could be considered a preferential payment. The idea is that your family member shouldn't get to "cut in line" and get paid ahead of other creditors such as credit cards, hospitals, etc. The bankruptcy code allows the trustee to sue your family member to get that money back. If this occurs it is likely that your relative will have to hire a lawyer and return the money to the trustee; even if they've already spent it. There are ways to legally pay back a family member without running afoul of the preferential payment rules. A competent bankruptcy attorney can guide you though this process without running the risk that your relative will be sued by the trustee.


June 23, 2007 - Tax Returns Required Under New Bankruptcy Law


One of the requirements under the new bankruptcy law passed in 2005 is that bankruptcy debtors must provide the trustee in their case a copy of the last tax return they have filed (a tax transcript from the IRS may be provided instead of a tax return). Although this requirement is not by itself very burdensome, the entire set of small new requirements as a whole operate to drive up the cost and difficulty of the entire bankruptcy process without providing much benefit. Trustees have said they have no interest in reviewing tax returns for every case as it is not beneficial and simply adds another meaningless task to their checklist.


June 11, 2007 - Median Income Test and Means Test Are Often Mistakenly Thought of as Being the Same


The terms Median Income Test and Means Test are often used interchangeably on many websites that provide bankruptcy information. The truth is that while they are related to each other, they are very different and distinct tests. The Median Income Test is a test where the potential bankruptcy debtor compares their Current Monthly Income (based on a historical 6 month rolling average) to the median income for their state. If their income is higher than the median, then they are required to take the Means Test. The bankruptcy Means Test is a complex mathematical calculation that determines whether a debtor's bankruptcy filing will be presumed to be abusive. It is important for anyone looking for bankruptcy information to realize that any website, law firm, or individual who does not understand the distinction between the Median Income Test and the Means Test probably does not have a sufficient working knowledge of the Bankruptcy Code to be providing competent advice.


May 28, 2007 - Most Texas Debtors Lose No Property When Filing Bankruptcy


A common fear many potential debtors have is losing their property when they file for bankruptcy. They have heard that filing bankruptcy wipes out your debts, but in exchange you give up all your property. This is an incorrect oversimplification of a very complex set of bankruptcy laws. In the Dallas / Fort Worth Texas area most people do not lose property because of a bankruptcy filing. Texas has a very generous list of exemptions (property that the bankruptcy court can not touch). Because of these generous exemptions, most debtors in a Texas bankruptcy lose no property what-so-ever as a result of filing bankruptcy.


May 14, 2007 - Payment Advice Filing Requirement Can Be Satisfied with Declaration In Some Cases


The Bankruptcy Code requires that debtors file 60 days worth of payment advices (i.e. pay stubs) with the court. For most debtors this is not a problem. However, for stay-at-home parents, the self-employed, or the unemployed this has created a problem because they have no payment advices to file. It is common sense that you can not file what does not exist. However, the lack of these documents in the court's file can lead to the issuance of a Notice of Deficiency in the bankruptcy case and a potential dismissal of the case. The solution many bankruptcy practitioners have used is to file a declaration by the debtor, signed under oath, that the required payment advices do not exist. This allows the court to check this item off their list, and can prevent the issuance of a notice of deficiency.


April 25, 2007 - Car Designation Order In Bankruptcy Means Test Can Impact Result


Bankruptcy debtors who are required to take the Means Test are allowed up to two vehicle ownership expense deductions. For those debtors with two vehicles, the order in which the vehicles are entered can impact the overall test result. Switching the order of which car is CAR ONE and which is CAR TWO can result in a higher overall vehicle ownership expense deduction. Bankruptcy attorneys should input the data both ways to determine which order maximizes their client's deductions.


April 11, 2007 - Debtor Confusion Commonplace At Creditor Meetings


Bankruptcy debtors must attend a creditor meeting as part of their bankruptcy case. The confusion that often arises during this meeting is mistaking the trustee or hearing officer for the judge. The person running the meeting may seem like the judge, but in fact they are not. Bankruptcy debtors should still treat them with respect and courtesy, but debtors should also realize that they have no final decision-making ability.


April 1, 2007 - Means Test Values Updated


For all bankruptcy cases filed on or after April 1, 2007, debtors will be required to use updated Census Bureau figures. These figures determine the appropriate median household income to be used in the Median Income Test and the Means Test.


March 28, 2007 - Post Bankruptcy Credit Available


There are many myths surrounding bankruptcy. One of the most common is that you can't get credit after you file bankruptcy. Nothing could be further from the truth. There are many lenders who are eager to extend credit to individuals coming out of bankruptcy. You may pay a higher interest rate, but credit is available. Many clients are amazed when within days of their bankruptcy discharge they receive offers for new credit cards and car loans. If bankruptcy clients wisely choose when and how to use post-bankruptcy credit, they will be well on their way to getting back on track financially.


March 17, 2007 - Health Care Ombudsman Designation Required in Certain Health Care Related Bankruptcies


An ombudsman is an individual appointed to receive, investigate, report on, and sometimes resolve complaints against a business, organization, or institution. In the bankruptcy context, a health-care ombudsman is sometimes appointed when a health-care provider or business files bankruptcy to facilitate patient interaction with the bankruptcy system. Attorneys should inform their bankruptcy clients involved in providing health care services that they may be required to attend a hearing related to the appointment of a health care ombudsman as part of their bankruptcy case.


March 12, 2007 - Spouses Who Do Not File Jointly Face Complex Means Test Issues


Spouses who do not file bankruptcy jointly and are required to take the means test face a variety of unresolved issues. The non-filing spouse's income is included for purposes of the median income test, but is then "backed out" of the means test calculation. "Backing out" the non-filing spouse's income, however, is a tricky proposition. The amount that can be backed out is dependant on the amount that the non-filing spouse contributes to the household expenses. Whether this amount should be calculated on a pro-rata basis, as a percentage of the spouses' relative incomes, or on the basis of some other metric is unclear. These hyper-technical details can have significant consequences on the debtor's ability to pass the means test. Lawyers will, in all likelihood, need to litigate these issues so that some clarity on the proper procedures can be determined.


March 07, 2007 - Citigroup Announces That It Will No Longer Use Universal Default Clauses


Citigroup, a major financial institution and credit-card issuer, has announced that it will cease its practice of including universal default clauses in its credit-card agreements. Universal default clauses allow Credit Card A to raise your interest rate even though you paid them on time because you had a late payment to Credit Card B. This creates a situation where one late payment may be all that is needed to raise your interest rate on all your credit cards to the 20 to 30 percent range. The elimination of this heavy-handed practice by Citigroup is a step in the right direction, but much reform is still needed in the credit-card industry. Hopefully, other credit-card issuers will follow Citigroup's lead.


March 06, 2007 - NACBA Convention To Be Held in Philadelphia


The National Association of Consumer Bankruptcy Attorneys (NACBA) will hold its fifteenth annual convention in Philadelphia, PA on April 19 to April 22, 2007. Topics of discussion at the convention will include the much publicized means test, bankruptcy related tax issues, representing military families, the constitutionality of certain bankruptcy code provisions, as well as many other topics of interest to bankruptcy attorneys.


February 20, 2007 - Seniors Are Fast Growing Segment of Bankrputcy Cases


Senior citizens are the fastest growing segment of bankruptcy filings. This increase in the need for bankruptcy protection among seniors is due, in part, to the increased cost of prescription drugs and health care. When faced with the need to purchase medicine that will keep them alive, but with no or insufficient insurance coverage, it is only natural that seniors turn to credit cards for help. These are not luxury expenses such as plasma TVs or cruises to Hawaii. Seniors are literally faced with the life-and-death choice of purchasing medicine on their credit cards or dying. What choice would you make?


February 1, 2007 - Means Test Values Updated


For all bankruptcy cases filed on or after February 1, 2007, debtors will be required to use updated IRS and Census Bureau figures. These figures determine the expenses for housing, food, transportation, and other items that lawyers and debtors are permitted to use for purposes of calculating the result of the bankruptcy means test.


January 26, 2007 - Texas Bankruptcy Filings on the Rise


According to the Administrative Office of the U.S. Courts the third quarter of 2006 saw 10,133 bankruptcy filings in the state of Texas. This is compared to 8,541 for the second quarter of 2006. While these numbers are still significantly below the 2005 filing numbers of 31,386 (third quarter) and 26,969 (second quarter), they do indicate that the number of filings are beginning to trend towards a return to normal levels. Many lawyers report these statistics are in line with what they have been seeing in their own individual practices.


January 20, 2007 - Texas Leads Country in Foreclosures


Texas leads the country in foreclosures in December by having 14,915 properties in the foreclosure process. December is the eighth month in 2006 where Texas has taken the top spot in the country in foreclosures. Many individuals and families may be forced to seek bankruptcy protection as a result of a looming foreclosure date.


December 2, 2006 - Many Consumers Wait Until After Holidays to Deal With Their Financial Difficulties


The holidays can be stressful for any family, but for families with serious financial problems the stress can be overwhelming. Despite this overwhelming stress, many families decide to wait until after the new year before looking into their financial options, including the possibility of bankruptcy. This could be a very costly mistake. It is human nature to want to have a good holiday and then deal with your problems later. Bankruptcy, however, is very sensitive to time tables and even short delays can have significant negative consequences. Families in serious financial trouble should, at the very least, speak with a bankruptcy attorney so that they can make an informed choice about whether waiting until after the holidays is a smart move or not.


November 14, 2006 - Will Democrats New Power Help Bankruptcy Consumers?


Now that the Democratic party is in control of Congress will there be any relief for consumers who need bankruptcy protection? In April of 2005, a Republican-controlled Congress pushed through the so-called Bankruptcy Abuse Prevention and Consumer Protection Act. This "Consumer Protection Act" has hurt consumers by making it more difficult and expensive for deserving families to file for bankruptcy protection. Unfortunately, with so many other pressing issues facing the country it is unlikely that reforming the "bankruptcy reform" law will get the attention it deserves. As a result, deserving families, including many military families, in need of help will continue to suffer.


October 17, 2006 - Today Marks One Year Anniversary of the New Bankruptcy Laws


October 17, 2006 marks the one year anniversary of the effective date of the new bankruptcy law passed by Congress in 2005. After being in effect one year, statistical evidence has shown that bankruptcy fraud is not rampant as claimed by the proponents of the law, but rather almost non-existent. Despite a large initial drop in the number of bankruptcy filings, the number of cases is steadily rising back to normal and expected levels. The new law might have changed the Bankruptcy Code, but it did not change the fact that hundreds of thousands of families are experiencing difficult financial times due to lay-offs, divorces, or major medical catastrophes. These families still need help to get back on their feet, and there are still many dedicated bankruptcy attorneys out there ready to do their part.


September 30, 2006 - Means Test Values Change Effective October 1, 2006


For all bankruptcy cases filed on or after September 1, 2006, lawyers and debtors will be required to use updated IRS and Census Bureau figures. These figures determine the allowed expenses for housing, food, transportation, and other items that lawyers and debtors are permitted to use for purposes of completing the bankruptcy means test.


August 21, 2006 - Internet Bankruptcy Information Can Be Very Misleading


Those interested in learning more about bankruptcy often start their search on the Web. While many sites provide extensive information about bankruptcy it is often misleading. This is not usually because of errors or outright deception, but rather because bankruptcy is a very local affair. Despite the fact that bankruptcy is a federal matter and the law should be uniform throughout the country, the reality is that it varies greatly from state to state, county to county, and judge to judge. For example, in Texas most Chapter 7 filers lose no property at all. This is not true in many other states. The lesson here is to make sure you know whether the information you are receiving is tailored to the area in which your case will actually be filed.


July 15, 2006 - Universal Default Clauses May Force Some Consumers Into Bankruptcy


Universal default clauses allow Credit Card A to raise your interest rate even though you paid them on time because you had a late payment to Credit Card B. This creates a situation where one late payment may be all that is needed to raise your interest rate on all your credit cards to the 20 to 30 percent range. When you have someone that was just barely able to pay all their bills at 8 percent interest and you increase their rate to 30 percent the chances of that person needing bankruptcy protection rise significantly.


June 26, 2006 - Bill Collectors Lie To Consumers And Say That Bankruptcy Is No Longer Available


Some bill collectors are telling consumers that because of the October 2005 changes to the Bankruptcy Code that they can no longer file for bankruptcy. While it is true that is is more difficult and expensive to file bankruptcy now than in previous years, the overwhelming majority of people who qualified under the old law still qualify for bankruptcy protection under the new law. Some bill collectors are outright lying to consumers in order to bully them into paying bills they cannot afford and in many instances no longer owe.


June 12, 2006 - Means Test Deductions For Secured Property Allowed Even If Debtor Intends to Surrender That Property


A bankruptcy court in the Northern District of Georgia recently ruled that debtors may include as deductions for means-test purposes all secured debt, even if the property securing those debts is to be surrendered. Section 707(b)(2)(A)(iii) states that a debtor can, in the means-test calculations, deduct payments that are “scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition.” The court found that this provision of the bankruptcy code does not require debtors to reaffirm these secured debts in order to be able to take the deductions in the mean test.


June 6, 2006 - Texas Bankruptcy Judge Outraged at Congress


Texas Bankruptcy Judge Frank R. Monroe in an opinion dismissing a bankruptcy case commented about the new bankruptcy law: "Can any rational human being make a cogent argument that this makes any sense at all?"

Other bankruptcy judges have expressed similar opinions. United States Bankruptcy Judge Keith Lundin opined about the new bankruptcy legislation: "No one has ever seen a piece of garbage like this" and went on to say that "...there's going to be the most fantastic anarchy in bankruptcy courts for years."


May 31, 2006 - 1 in 60 U.S. Households in Bankruptcy


According to the American Bankruptcy Institute (ABI), one in every sixty households in the United States has filed for bankruptcy. According to ABI's executive director Sam Gerdano this means that it is probable that "someone in your family, a neighbor down the block or a co-worker in your office is in bankruptcy court."


May 15, 2006 - NACBA Files Suit Challenging New Bankruptcy Law


The National Association of Consumer Bankruptcy Attorneys (NACBA) has filed a lawsuit in Connecticut challenging the constitutionality of several of the provisions of the new bankruptcy law signed by President Bush in 2005 and which went into effect on October 17, 2005. One specific issue is the constitutionality of the Debt Relief Agency (DRA) provisions as they relate to attorneys.


April 11, 2006 - Court Filing Fees Increase Today


The filing fees charged by courts for filing bankruptcy increase effective April 11, 2006. The filing fee for Chapter 7 has increased from $274 to $299. The filing fee for Chapter 13 has increased from $189 to $274.


March 3, 2006 - No IRS Ownership Expense Allowed for Paid-Off Cars


The United States Trustee has taken the position that in order to take the ownership expense for an automobile the client must have a debt obligation on the vehicle. In other words, you can't take the ownership deduction for means-test purposes if your car is paid off. This position penalizes those who are trying to live frugally and within their means, but unfortunately this looks like the position the courts will also take with respect to this issue.


February 17, 2006 - Texas Median Income Figures Adjusted Upward


The income figures for Texas were recently adjusted upward. The new figures will provide a slight bit of relief for consumers who are seeking bankruptcy protection. The increases, however, are only a few percentage points. But for people at the margin, they will be a welcome change.


January 7, 2006 - Credit Card Minimum Payment Set To Increase


Credit card minimum payments will soon be increasing for many consumers. The amount of the increase will vary depending on the issuer, but could as much as double. If you have a typical credit-card debt load of $9000 and you currently have a 2% minimum payment of $180, your new payment could be as high as $360. For consumers who were struggling to make the old minimum payment, the new higher minimum payment is simply beyond their reach.


December 2, 2005 - 6 Month Rolling-Average Test for Income May Not Be As Burdensome As Previously Anticipated


Income under the new bankruptcy laws is calculated on an average of the last six months income instead of your actual income. Bankruptcy attorneys initially thought this would lead to situations were recently laid-off clients would be deemed to have thousands of dollars in income when in reality their income is zero. Although this is still possible, it appears that in practice this will not be as large an issue as previously anticipated. This is because people rarely file bankruptcy immediately after losing their jobs. It is only after several months of joblessness that bankruptcy becomes an option for most people. As a result, most bankruptcy clients will not be harmed be the requirement that income be calculated on a six month average.


November 28, 2005 - Bankruptcy Automatic Stay Now More Limited in Scope


Traditionally, an automatic stay has gone into effect upon the filing of a bankruptcy case. The automatic stay is a type of restraining order that prevents creditors from taking actions to collect a debt, such as foreclosing on a house, unless they seek the court's permission first. Under the newly effective bankruptcy law, the automatic stay can be limited or non-existent for certain filers. Without the protection of the automatic stay, many of the benefits of bankruptcy are eliminated. People filing their own bankruptcies without an attorney are especially vulnerable to this problem.


November 20, 2005 - Constitutional Challenge to New Bankruptcy Law Filed in Minnesota


A lawsuit challenging the constitutionality of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was filed in Minnesota. The suit alleges violations of the First and Fifth Amendments to the U.S. Constitution. More specifically the suit alleges that classifying bankruptcy attorneys as Debt Relief Agencies limits attorney's free speech rights by limiting what advice they can give to clients.


November 14, 2005 - Very Few Cases Filed Since October 17th Law Change


There was a huge surge of thousands of last minute bankruptcy filings prior to the October 17th law change. Now hardly any new cases have been filed in the last month. This is generally viewed in the bankruptcy community as a temporary and very much expect lull. Most people that needed to file bankruptcy did so prior to October 17th, but the underlying factors that lead to bankruptcy such as divorce, medical catastrophe, layoffs, and high debt levels still exist. These factors as well as high gasoline prices, Katrina and Rita economic after effects, and an increase in credit card minimum payments will continue to force people into seeking bankruptcy protection.


November 9, 2005 - Jobs Not At Risk Because of Bankruptcy Filing


Federal law prohibits an employer from firing an employee solely because that person has filed bankruptcy. As a practical matter, it is very unlikely that an employer would even know their employee filed bankruptcy unless they were also a creditor of the employee. The bottom line is that it is illegal for your boss to fire you because you filed bankruptcy.


November 1, 2005 - 8 Years Between Chapter 7 Filings Now Required


As of October 17, 2005 the Bankruptcy Code now limits a debtor's ability to get a discharge in Chapter 7 to cases filed at least 8 years apart. This is an increase from the previous requirement of 6 years between filings. It is important to note that this requirement is viewed from filing date to filing date, not from discharge date to filing date.


October 25, 2005 - Alternatives to Bankruptcy May Have Hidden Costs


Most people want to avoid bankruptcy at all costs. This is perfectly reasonable, but some bankruptcy alternatives have hidden consequences because of a concept called "imputed income" or "forgiveness-of-debt income". Even if you can work with your creditors and have them forgive most of your debt you could still face a stiff tax bill. The IRS taxes your income and defines income as any increase in your wealth. Your wealth can be thought of as what you have minus what you owe.

Let's say you own $10,000 worth of belongings, but you owe $6,000 on your credit card. Your "wealth" would be $4,000 ($10,000 minus $6,000). If you work with your credit-card company and get them to agree to lower the amount you owe to only $1,500 then your "wealth" is now $8,500 ($10,000 minus $1,500). From the IRS' point of view your "wealth" has increased from $4,000 to $8,500 and they may tax you on your "income" of $4,500. They treat any forgiveness of debt the same as if the credit card company had written you a check for the amount they have forgiven. You must generally pay income taxes on the amount forgiven. If you are lucky enough work out a large amount of debt forgiveness outside of bankruptcy you may still get stuck unknowingly with a tax bill for tens of thousands of dollars. And these types of taxes may not be dischargeable in bankruptcy. Bankruptcy is not right for everyone, and alternatives may be the best course for you, but any decision should be based on knowing all the risks and not some blind assumption that bankruptcy is always bad and avoiding it is always good.


October 18, 2005 - Bankruptcy Protection is Still Available


The new bankruptcy law is now in effect. We have been writing for months about the many negatives of the new law, but now we must learn to live under the new system. While there is no doubt that most consumers were better off under the old law, we want to emphasize that BANKRUPTCY PROTECTION HAS NOT ENDED. Yes, it will cost more. Yes, you must attend classes now. Yes, you will have to produce more paperwork now. But bankruptcy is still here if you need help. The new, complex system of bankruptcy rules will be a challenge to navigate, but bankruptcy attorneys across the country are ready to continue helping deserving individuals and families get back on their feet.


October 14, 2005 - Bankruptcy Filings Rise Dramatically in Advance of Bankruptcy Law Change


With less than three days before the most far-reaching change in the bankruptcy laws in twenty-five years consumers are scurrying to file bankruptcy in record numbers. People are waiting for hours in line at bankruptcy courts around the country to be able to beat the deadline. Bankruptcy attorneys are also feeling the crunch as last minute filers flood their offices.


October 7, 2005 - Means Test Only Applicable When Debt is Primarily Consumer Debt


Of the dozens and dozens of changes to the current bankruptcy law about to take place, the most talked about change is the means test. This means tests would limit many consumers' ability to qualify for Chapter 7 bankruptcy protection. One bright spot in the new law, however, is that the means test only applies to consumers whose debt is primarily consumer debt. If your debt is not primarily consumer debt, then you are not subject to the means test.


September 29, 2005 - Fair Debt Collection Practices Act (FDCPA) Claims May Increase in Light of Harsh New Bankruptcy Laws


The debt collection industry may see a significant rise in the number of FDCPA claims as a result of the new bankruptcy legislation. For years many bankruptcy lawyers have avoided these types of claims because client problems could be more easily and cost effectively solved through the bankruptcy courts. Now that the credit-card industry and Congress have made access to bankruptcy protection harder to get, there is increased incentive to go after violators of these less-often-used federal laws. The debt collection industry has violated these laws for years with little or no consequences and through their greed in trying to exact the last pound of flesh from already suffering debtors they may now be called to account for their illegal behavior.


September 14, 2005 - Domestic Support Obligations Become First Priority in Bankruptcy


Domestic Support Obligations, which include such items as child support payments, have moved up to become the first priority of claims paid in bankruptcy. This may seem to be a positive development and huge victory for child advocates. In theory, it makes sense that child support payments be put ahead of payments to credit card companies or other creditors. However, the change in does little in actual practice because having priority only matters when there are funds (i.e. assets) in the bankruptcy to distribute. Most Texas consumer bankruptcies are no asset cases where there are no funds to distribute. Consequently, having a priority claim means nothing in most cases.


September 4, 2005 - New Bankruptcy Law Makes Reaffirmation Agreements More Difficult


Bankruptcy relieves a debtor of the obligation to pay back debts. Sometimes, however, it is beneficial for a a debtor to renew (i.e. reaffirm) an obligation that would otherwise be forgiven. This generally occurs with secured property such as houses or cars. The Bankruptcy Code lays out specific requirements for such reaffirmations agreements. The new bankruptcy law adds additional requirements that must be met in order for these reaffirmation agreements to be valid. These new requirements add yet another layer of cost to the bankruptcy process. The added costs under the new bankruptcy law will mean fewer deserving debtors will be able to afford bankruptcy protection. Of course, that was exactly what the credit industry wanted.


August 17, 2005 - Number of Pro Se Filings May Rise Under New Bankruptcy Law


Because of the cost increases expected under the new bankruptcy law many debtors may choose to file bankruptcy on their own without the help of an experienced bankruptcy attorney. This increase in pro se debtors may have many negative consequences. More cases will be dismissed because of technical errors by debtors. Debtors may lose property they would otherwise be entitled to keep. The court system will be slowed down by additional hearings. Creditors will be in a position to take advantage of inexperienced debtors who are unfamiliar with the bankruptcy system.


July 31, 2005 - New Bankruptcy Law May Have Chilling Effect on Small Business Start-ups


Small businesses account for a significant part of the economy and of new job creation. However, opening a small business has always been risky. This risk was tempered by the fact that should worse come to worst there was the safety net of bankruptcy to keep you from having to live under your local highway underpass. That safety net has now been weakened considerably by the new bankruptcy law. Why should we care? Because if the bankruptcy laws discourage people from opening new businesses, then there will be less new jobs, less tax revenue, and a weaker economy.


July 10, 2005 - Income Under New Bankruptcy Law Calculated on 6 Month Rolling Average


Under current law your income is determined by what your actual income is on the day you file your bankruptcy case. The new law considers your income to be the rolling average of your income for the six months prior to the month of your filling. For example, if you file your case on July 8, your income would be the total of your monthly income from January to June divided by six. The net result is that a debtor who had been making $3000 per month but gets laid off in July will be viewed by the bankruptcy court as still making approximately $3000 per month even though, in reality, they have no income.


July 5, 2005 - Texas Homestead Exemption No Longer Unlimited


Texas has traditionally had an unlimited homestead exemption under bankruptcy law. This means that you can not lose your home no matter how much it is worth. The new bankruptcy law now limits the amount of equity you can have in your homestead to $125,000. This limitation only applies to those who haven't owned their home (or rolled over equity from another Texas homestead) for at least 1215 days prior to filing their bankruptcy case. This change will affect very few consumer debtors, but is an important consideration for some debtors.


July 1, 2005 - New Bankruptcy Law Protects 529 College Savings Plans


Although the newly passed bankruptcy legislation hurts consumers overall, there are a few bright spots. One clear bright spot is that 529 College Savings Plans are not counted as property of the bankruptcy estate. This means that the money in these plans, which have become a popular way to save for college in recent years, can not be taken by the bankruptcy court and given to creditors. There are some limits imposed on this new rule, but overall this is a very positive development.


June 24, 2005 - Bankruptcy Can Benefit Your Kids


There are many significant and immediate benefits for children when their parents declare bankruptcy. Harassing phone calls from creditors stop. The overall level of stress in the house caused by money problems goes down. Parents, who are now debt free, are able to start saving for college. A parent can choose whether or not they discuss the bankruptcy with their children, but declaring bankruptcy can bring definite improvements to their children's lives, both immediately and in the years to come.


June 15, 2005 - Bankruptcy Costs Expected to Rise Under New Bankruptcy Law


Bankruptcy legal fees are expected to go up once the new bankruptcy law goes into effect in October 2005. The new law imposes many additional requirements on both debtors and their attorneys. The additional time and work required under the new law will likely increase the price of an average bankruptcy by an additional $500 to $1500. Many consumers who need bankruptcy protection are filing now before the new law takes effect in order to avoid the new requirements of the law as well as the additional fees.


June 13, 2005 - Fair Credit Reporting Act Violations Common After Bankruptcy


The Fair Credit Reporting Act (FCRA) is a set of federal laws that require the information on your credit report to be accurate. Many people who file bankruptcy may not be getting the full benefit of that bankruptcy filing because their credit report contains inaccuracies relating to the bankruptcy. The bankruptcy wipes out most debts and those debts should be changed in the credit report to a balance owed of zero. If the balance is not zeroed then that debt will continue to drag down the consumer's credit score. This inaccuracy is a violation of the FCRA and consumers should not tolerate it. If you find yourself in this situation contact an attorney so that you can get your credit report corrected. Most attorneys do not charge clients for these types of cases because the law requires the "other side" who broke the law to pay your attorney's fees for you.


June 5, 2005 - Social Security Not Counted as Income Under New Bankruptcy Law


Although the new bankruptcy law is a major defeat for consumers generally, it does have a few benefits for select debtors. One of these benefits is that Social-Security income is not counted as income for purposes of qualifying for bankruptcy under Section 707(b) of the Bankruptcy Code. This provision will help at least some debtors qualify under the harsh new bankruptcy rules.


May 17, 2005 - John Saitis to Present Lecture on New Bankruptcy Bill to the Tarrant County Debtor Bar Association


John Saitis will be lecturing on the changes to the Bankruptcy Code, specifically section 707(b)(6), to the Tarrant County Debtor Bar Association. The Debtor Bar Association is made up of the top bankruptcy attorneys in the Fort Worth Tarrant County area.


May 8, 2005 - Chapter 7 Bankruptcy Filing Fees to Increase


Under the new bankruptcy laws the filing fee for a chapter 7 bankruptcy will increase from $209 to $254. While this increase may seem minor, it represents just one more hurdle that cash-strapped debtors will have to clear before being able to get their financial lives back on track through bankruptcy.


April 29, 2005 - NACBA Holds Annual Conference in San Diego


The National Association of Consumer Bankruptcy Attorneys (NACBA) is holding their annual convention in San Diego, California today through Sunday. The major thrust of the convention will be educating bankruptcy attorneys from across the country about the newly-passed bankruptcy laws. The Law Offices of John Saitis, PLLC will be in attendance so that we may keep up with the latest changes in the bankruptcy laws.


April 20, 2005 - President Bush Signs Bankruptcy Bill into Law


President Bush signed the Bankruptcy "Reform" bill into law today. A few provisions of this new law go into effect immediately, but the majority of the changes will not be effective for another 6 months. Some of the changes include a "means test" that will make it more difficult to qualify for bankruptcy, new paperwork requirements, a credit counseling requirement, and dozens of other changes aimed at making bankruptcy protection harder and more expensive to obtain.


March 16, 2005 - Surge in Bankruptcy Filing Predicted


A surge in bankruptcy filings is predicted if the Bankruptcy "Reform" bill becomes law. If passed, the majority of the new law's provisions will not take effect for six months. In those months many people who have been on the edge of bankruptcy are predicted to file so they can take advantage of the benefits of the current law.


March 15, 2005 - Credit Counseling Mandatory Under "Reform" Bill


The Bankruptcy "Reform" bill require all debtors to attend mandatory credit counseling classes before they can file for bankruptcy. On the surface, this sounds like a very reasonable idea. After all, what's wrong with people learning about how to manage credit more effectively before deciding if they should file bankruptcy? The problem is most people considering bankruptcy are past the point where counseling would help. These folks are drowning in debt and need immediate help. Some may lose their house within 24 hours to a foreclosure if a bankruptcy is not filed.

The true purpose of this new requirement is to put up yet another obstacle to filing bankruptcy and to increase the cost of bankruptcy. The credit industry figures that if they make it difficult enough, and expensive enough, to file bankruptcy that some people will just give up. Unfortunately, they are right. Many people will give up and be forced from their homes, lose their cars, and their last chance to start fresh.

America has always been about second chances, but the future seems much less hopeful now for those unfortunate folks who need the second chance that a bankruptcy could provide.


March 12, 2005 - "Means Test" Limits Chapter 7 Availability


The means test in the new bankruptcy bill is designed to deny Chapter 7 bankruptcy protection to deserving families. Currently, each bankruptcy is reviewed on a case-by-case basis to determine if the debtor is deserving of help. The new means test forces a cookie-cutter approach by having all cases compared against the median income for that state. If you don't meet the strict new requirements you aren't allowed to get your discharge in a Chapter 7 bankruptcy.


March 10, 2005 - Senate Passes Bankruptcy "Reform" Bill


Today the Senate passed the so-called reform bill by a vote of 74 to 25. Eighteen Democrats voted for this bill. The real fight over this bill was in the Senate, and now that it has passed it becomes an almost forgone conclusion that this bill will become law. As a result many deserving families will be denied bankruptcy protection and predatory credit-card companies can add just a little more to the $30 BILLION profit they made last year.