by Mike Wallace | May 22, 2015 | Bankruptcy
PAYING WITH AUTOMATIC DEBITS AFTER FILING FOR BANKRUPTCY
If you have car payments or other payments being made to a secured creditor by way of an automatic debit from a bank account, you will need to make arrangements with the creditor to pay them by other means once you have filed for bankruptcy.
Creditors will not continue auto debits after you have filed for bankruptcy, because to do so would violate the automatic stay that is entered upon filing for bankruptcy protection.
Creditors often will also not accept online payments after you have filed for bankruptcy and will cease sending billing statements.
It is important to contact the creditor by telephone and ascertain from the creditor how you should get payment to them.
Be certain to get a full name of the person you are contacting, and most importantly, make certain that you keep a verifiable proof of any payments that you make to creditors.
In a Chapter 7 bankruptcy filing car creditors will most of the time reinstate auto debits from your bank account after you have signed a Reaffirmation Agreement and/or have been discharged.
by Mike Wallace | May 22, 2015 | Bankruptcy
BANKRUPTCY JUDGMENT LIEN
Texas Property Code Section 52.001 provides that an abstract of judgment when recorded and indexed in a county in which a judgment debtor owns real property creates a valid judgment lien on that property, unless the real property is exempt from seizure or forced sale.
This judgment lien also attaches to property acquired after such recording and indexing, according to the plain language of the statute.
There are three steps to securing ad maintaining a valid judgment lien against a judgment debtor. TAPPS, L.L.C. v. Nunez Co., 368 B.R. 575, 577 (W.D. Tex 2005).
First, the judgment creditor must obtain and file an abstract of judgment in accordance with Chapter 52 of the Texas Property Code. Id.
Second, the judgment must be kept alive through the issuance of a writ of execution. Id. Texas Civil Practice & Remedies Code Section 34.001(a) provides that a judgment becomes dormant and may not be executed on unless a writ of execution is issued within ten (10) years after the rendition of the judgment.
Finally, if the judgment is not satisfied within ten (10) years of the recording and indexing of the abstract, then a subsequent abstract must be obtained and filed in accordance with Chapter 52 of the Texas Property Code. TAPPS, L.L.C at 577.
If a judgment creditor obtains a judgment against you prior to the filing of a bankruptcy case and properly perfects their lien by meeting the above requirements, then their judgment lien “passes” through bankruptcy and remains a valid lien.
Stated another way, the Debtor’s personal liability can be discharged in bankruptcy, but the lien survives the discharge.
If the lien has not attached to property prior to the filing of a bankruptcy petition, then even though Section 52.001 of the Texas Property Code applies to after acquired property, the judgment creditor cannot create a valid lien after a bankruptcy filing because the underlying debt has been discharged.
The key for the judgment creditor is to file the abstract prior to the bankruptcy and for the lien to attach to property owned by the Debtor at the time of the bankruptcy filing, which of course would exclude the Debtor’s homestead property.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law, can be very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | May 22, 2015 | Bankruptcy
JOB DISCRIMINATION NOT ALLOWED AS A RESULT OF BANKRUPTCY
A governmental unit may not deny, revoke, suspend or refuse to renew a license, deny employment to, terminate the employment of, or discriminate with respect to employment against a person who has sought protection under the Bankruptcy Act (11 U.S.C. Sec. 525(a)).
Private employers may not terminate the employment of or discriminate with respect to employment against a person who has sought protection under the Bankruptcy Act (11 U.S.C. Sec. 525(b)).
Discrimination Must Be Based Solely on Bankruptcy Filing
The anti-discrimination statute under the Bankruptcy Act requires that the discrimination be based solely on the fact that person discriminated against is or has been a debtor under the Act. White v. Kentuckiana Livestock Mkt., Inc., 397 F.3d 420 (6th Cir. 2005) (Court concluding that Debtor must show that their termination of employment was based solely on the filing of bankruptcy).
So, if the employer bases the termination on factors other than a bankruptcy filing, the employee debtor does not have any remedy against the employer. In Re Banner, 422 B.R. 608, 612 (Bankr. N.D. Tex. 2009).
Private Employer Refusal to Hire
A public or governmental body cannot refuse to hire someone based solely on the fact that the individual has sought protection under the Bankruptcy Act. Section 525 reads differently for a private employer and does not expressly prohibit the denial of employment, specifically omitting the phrase “deny employment to” when listing the prohibitions of private employers.
At least one Texas court has concluded that Congress acted intentionally and purposely in refusing to use the same language with private employers as with governmental bodies.
Burnett v. Stewart Title, Inc., 431 B.R. 894, 897-898 (S.D. Tex. 2010). The court concluded that the private employer did not violate the statute when it denied employment to a prospective employee based on a previous bankruptcy filing. Id. at 901.
The court in Burnett refused to follow the analysis in Leary v. Warnaco, 251 B.R. 656 (S.D.N.Y. 2000), where the court concluded that the phrase “with respect to employment” in Section 525(b) precluded discrimination against prospective private-sector employees.
The majority view of the courts has been that Congress in Section 525(a) specifically precluded public employers from denying employment to a prospective employee based solely on a previous bankruptcy filing, but specifically excluded the phrase “deny employment” in Section 525(b).
The Third Circuit in Rea v. Federated Investors, 627 F.3d 937 (3rd Cir. 2010) concluded that a private employee does not have a claim against a private employer based on the employer refusing to hire because the employee has previously filed for bankruptcy. The U.S. Supreme Court denied the writ of certiorari in Rea on October 3, 2011.
Summary
While governmental bodies may not deny employment to prospective employees based solely on a previous bankruptcy filing, it appears Congress did not intend to provide the same protection to private-sector employees. Any discrimination based on a bankruptcy filing must be the “sole” reason for the employer treating an employee in a disparate manner.
So, if the employer articulates a reason for treating the employee in a discriminatory manner, whether it be a private or public employer, which is based on something other than a bankruptcy filing, then there is no violation of the statute.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law, can be very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | May 22, 2015 | Bankruptcy
WHAT DOES “CRAM DOWN” MEAN?
The term “Cram Down” commonly refers to the procedure by which a Chapter 13 debtor pays a car creditor the value of a vehicle at the time of the filing of a Chapter 13 plan or reorganization, as opposed to what the car creditor is actually owed.
This process under current bankruptcy law is generally now limited to a vehicle that was purchased for personal use and more than 910 days prior to the filing of the bankruptcy.
The limitation on cram down does not apply where a vehicle is owned outright and the owner borrows money against the equity in the vehicle.
The security interest that the creditor takes in this type of financing arrangement is known as a “non-purchase money security interest.”
A debtor can cram down a vehicle where the car creditor has a non-purchase money security interest.
The ability to cram down can be of significant benefit to a debtor reorganizing their debt under Chapter 13.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | May 22, 2015 | Motor Vehicles
YOUR VEHICLE IN A CHAPTER 7 BANKRUPTCY
A Debtor in a Chapter 7 bankruptcy has three options with respect to personal property that is financed.
The creditor that is owed on a note secured by the financed personal property is referred to as a “secured” creditor. The property securing the note is known as collateral.
The Debtor can: 1) surrender the collateral and discharge the personal indebtedness;
2) redeem the collateral, which means to pay the indebtedness off; or
3) reaffirm the indebtedness.
To reaffirm the indebtedness on the collateral the Debtor signs what is known as a reaffirmation agreement with the creditor.
When the Debtor reaffirms a debt they are agreeing to retain the collateral and keep making payments. Most importantly though the Debtor is waiving their discharge if they sign a reaffirmation.
That means that the Debtor remains personally liable for the debt.
So, if the Debtor later defaults after signing a reaffirmation agreement they can be held liable for any deficiency after the sale of the collateral.
A deficiency arises where the collateral sells for less than is owed to the creditor.
Reaffirmation agreements are to be seriously considered before signing and you should consult a bankruptcy attorney before signing one.
The Reaffirmation Agreement can be negotiated to change the original terms of the repayment obligation, but generally the agreement does not alter the initial terms of repayment.
The Debtor is obligated to file what is known as a Statement of Intent within thirty (30) days of the filing of a petition under Chapter 7 or on or before the date of the meeting of creditors, whichever is earlier. (11 U.S.C. Section 521(a)(2)(A)).
The Debtor must choose one of the three options previously discussed: 1) surrender; 2) redeem; or 3) reaffirm.
If the collateral securing the note is a vehicle the Debtor must redeem the collateral or sign a reaffirmation agreement within 45 day of the meeting of creditors. (11 U.S.C. Section 521(a)(6).
Failure to redeem or reaffirm within the 45 days causes the following to occur: 1) the automatic stay is terminated; 2) the property is no longer property of the estate; and 3) the creditor may take whatever action that would be allowed under non-bankruptcy law, including the use of a contractual provision providing for default upon the filing of bankruptcy, commonly known as an “ipso facto clause.” (11 U.S.C. Section 362(h)).
So, even if you are current on payments and you have failed to abide by the requirements of filing a Statement of Intent or to carry out the expressed intent to redeem or reaffirm, then the creditor can repossess the vehicle and look to the Debtor for any deficiency.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
