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What is an Adversary Proceeding and Its Types?

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During any time within the bankruptcy process, any of the parties involved may choose to file for an adversary proceeding. This article will seek to explain what an adversary proceeding is, how it works, and what are its main types.

What is an Adversary Proceeding?

An adversary proceeding is a type of lawsuit that is separate but related to the bankruptcy case. It may be filed for any complaints related to the bankruptcy for which a court motion cannot suffice. For instance, the debtor may choose to file an adversary proceeding against a creditor in response to the transgression of the former in regard to the automatic stay period. Typically, because it is its own case number, the filer can have a different attorney from the one leading the bankruptcy case.

How It Works

To get started, the interested party first needs to file a complaint with the bankruptcy court and request for their judgment. A summons is then served on the defendant and a copy of the complaint is sent to them as well. They are given a certain number of days to respond to the complaint and file an answer. If they fail to do so, the court will grant a default judgment in favor of the plaintiff.

Main Adversary Proceedings Types

There are numerous reasons under which an adversary proceeding may be filed. Some of its main types are listed below.

Preferential Transfer

The bankruptcy trustee could file a proceeding if it is known that you were insolvent and paid any of your creditors more than $600 within the last 90 days before you filed for bankruptcy.

Bankruptcy Fraud

If you have suspected of engaging in bankruptcy fraud, any of your creditors, the bankruptcy trustee, or the Office of the United States Trustee will file an adversary proceeding against you to deny you your debt discharge. Depending on its severity, you may also incur a number of other harsher penalties. (HYPERLINK: Bankruptcy Fraud – Beware of the Consequences)

Violation of Automatic Stay

A debtor can choose to file an adversary complaint against any creditor that may have violated the automatic stay period in which all debt collection activity is required to be stalled. Depending on the severity of the violation, the creditor may be required to pay the debtor any legal fees involved as well as a sum in damages determined by the court.

Sale of Jointly Owned Property

In a Chapter 7 bankruptcy, if a debtor jointly owns any property with another party, the bankruptcy trustee could file a proceeding to force the sale of the said property in order to pay back your creditors.

Have any question regarding adversary proceeding or in need of legal advice regarding it, please don’t hesitate to get in touch with us through our live chat or by calling 512.640.3340.

What Happens to a Timeshare in a Bankruptcy Case?

A timeshare is a property in which multiple parties hold ownership. Because of its unique nature as an asset, many may wish to know what happens to a timeshare in a bankruptcy case. This article will aim to provide you with that info as well as other important details related to the topic.

Timeshare and Bankruptcy

Despite a separate real estate category, in bankruptcy courts, timeshares will be treated much the same as, say your personal residential property. If you file for bankruptcy after the foreclosure of your timeshare, the outcome is more straightforward and the same in Chapter 7 and Chapter 13, with you getting a discharge for all your timeshare-related debt.

However, if you still own it at the time of filling, what happens to it largely depends on which bankruptcy chapter you filed under.

Timeshare and Chapter 7

Since most timeshares are unlikely to build on any equity, the bankruptcy trustee cannot sell it off to repay your creditors. Thus, provided you can continue making payments on it, you are allowed to keep it. Meanwhile, if the timeshare does hold ay equity, expect its selling to be virtually guaranteed as most state laws don’t provide any exemptions for it. However, if your state allows for a wildcard exemption, you can avail its benefit to protect your timeshare.

You yourself can also choose to surrender your timeshare during bankruptcy. Under chapter 7, if the timeshare holds no equity, in your bankruptcy discharge any remaining debt balance on it and unpaid maintenance fees assessed before the date of your filing also get eliminated.

However, in most states, you will still be required to pay any fees on the timeshare incurred between the period of your filing and its foreclosure. Because of this, sometimes it might more advantageous to file for bankruptcy after foreclosure to avoid paying such fees. However, it is highly recommended to consult a qualified attorney before doing so to avoid any negative tax implications.

In some cases, surrendering your timeshare that holds equity could also be advantageous. If you hold any priority debt such as unpaid income taxes, your bankruptcy trustee must use the proceeds from selling the timeshare to wipe out that debt before clearing any non-priority ones.

Timeshare and Chapter 13

Under Chapter 13, you are allowed to keep ownership of your timeshare provided you can demonstrate to the court that you have enough disposable income to make payments on it. In case the court deems you to be unable, you are required to surrender your timeshare. Do note that the trustee might not sell the timeshare for you. Instead, you will have to make arrangements for it yourself.

If you have any queries or are in need of assistance regarding the bankruptcy process, please don’t hesitate to give us a call or get in touch through our live chat.

Secured Claims vs. Unsecured Claim – The Difference Explained

A claim is a term used to describe the outstanding debt a person owes to a specific creditor. In bankruptcy, a creditor must file their claim first in order to receive payment. There are two types of claims that a creditor can file – secured and unsecured. The main difference between the two is that in the former the claim is guaranteed by collateral while the latter has no such guarantee. This blog will educate you on the further differences between the two claims and how their processes work in bankruptcy.

The Claim Process

Within a bankruptcy process, the court may send each of your creditors a deadline (called claim bar) to submit proof of their claim. In addition, in their claim form, they will have to fill out relevant information on their owed debt such as its type, outstanding amount, and whether it is secured or unsecured. Depending on which of the either two is checked by the creditor, the way your owed debt gets discharged may be processed differently.

Secured Claim

Since this type of claim is a debt that was secured by collateral (e.g. home, car, or another type of property), how the creditor is repaid is fairly straightforward. If the said property is non-exempt, the creditor can take ownership of it and attempt to sell it to repay themselves.

However, there are certain types of secured claims in which the said involved debt does not necessarily need to be tied to any collateral. One example is your tax debt, in which the IRS can take the approval of the court to sell your property to secure payment.

Unsecured Claim

Unsecured claims are usually filed on debts that were not tied to any collateral (e.g. your outstanding medical bills, credit card debt, etc.) As such, in a discharge process, the creditors are not allowed to take procession of your property themselves in an attempt to secure debt repayment.

Rather, your non-exempt assets are first taken over by the court trustee who sells them and uses the proceeds to repay the amount to the creditor(s). If you have multiple creditors with an unsecured claim, repayment is done in order of priority. Debts such as child support, money owed to employers, and rent are paid off first. Meanwhile, debts such as those on the credit card or loans from friends and family are paid last.

Get the Help of a Professional Bankruptcy Attorney

Filing for bankruptcy is a very important decision with some serious consequences. Taking the help of a legal expert can go a long way in ensuring that its outcome remains more in your favor. To schedule a free consultation with a bankruptcy attorney, call 512.640.3340, or book one directly online.

6 Revealing Stats about Bankruptcy in America

There is a terrible misconception that bankruptcies are a result of careless spending or financial irresponsibility. However, having dealt with numerous bankruptcy cases throughout my career, the overwhelming majority tend to stem from people falling into unfortunate circumstances e.g. losing a job, incurring high medical bills as a result of injury or chronic illness, etc. Here are 6 revealing stats about bankruptcy in America.

1. Bankruptcy is on the Decline

The number of bankruptcy cases has been on a steady decline since 2005. Interestingly, the fall has been sharper in the case of business compared to individuals. In 1980, nearly 13 percent of all bankruptcy fillers were businesses. Today, the figure is less than 3 percent. However, as the country enters a recession, the number of bankruptcy cases are likely to surge upwards again.

2. California Leads in Terms of Total Bankruptcy Cases

On average, California tends to have the highest number of total bankruptcy cases. In 2011, at 240,151, the state accounted for 17 percent of all bankruptcies across the country and nearly the same as the number for the next three states combined.

3. Two-Thirds of All Bankruptcies Relate to a Medical Condition

Without argue the biggest reason why Americans file for bankruptcy is due to incurring high medical expenses or due to time out of work. A recent study found that a staggering 66.5% of all bankruptcies were tied to healthcare costs. As healthcare costs have increased over the years while real income had remained largely stagnant, the proportion of bankruptcy cases citing this reason is also increasing.

4. Bankruptcy in Older People is Increasing

Since the 90s, the number of seniors filing for bankruptcy has been on the rise. The percentage of bankruptcy filers aged 55 or above has more than doubled in this period, now accounting for 20% of all cases.

Interestingly, at the same time, bankruptcy among younger individuals (<25) has seen a sharp decline. In 1994, they accounted for 11% of all cases. In 2010, the figure was only 1.33%.

5. Women Are More Likely to File for Bankruptcy

In 2010, women accounted for 52.26% of all bankruptcy filings. However, the proportion has gradually decreased over the years, largely because of more economic opportunities opening up for women and the gender pay gap diminishing.

6. Bankruptcy Filling Among Lower-Income Decreasing

For those earning $30,000 or under, the percentage of total filers decreased from 67.7% in 2006 to 59.53% in 2010. However, for those earning $60,000 or above, the percentage increased from 5.5% to 9.18% in the same period.

Thinking of filing for bankruptcy? The help of a legal lawyer can be crucial for better navigating through the complex process. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.

Bankruptcy Means Test – Find Out if You Qualify for Chapter 7 Bankruptcy

Many Americans see filing for Chapter 7 bankruptcy as a means to get rid of their high debt burden and restart their financial life on a fresh new slate. However, in order to be eligible for it, individuals have to first pass a bankruptcy means test. In simple terms, it is a formula to determine if your level of income is low enough for filing for bankruptcy. Having inadequate awareness or misconception about the means test, a lot of Americans fail to take advantage of filing for bankruptcy, assuming that they would probably not qualify. In this article, we will be offering a detailed overview of the bankruptcy means test and what it entails.

How it Works

The bankruptcy means test takes into account your current financial condition to check whether you can qualify for a bankruptcy discharge. The whole process can be relatively complicated. However, if your current income is below your state’s median income, you are deemed to have passed the test and don’t need to complete the rest of it.

However, if your present income is higher than the state’s median, don’t worry, there is still a chance that you might be able to qualify. However, a lot of factors will be taken into consideration in the assessment. Such can typically include your average net income for the last six months, any change to financial status e.g. loss of employment, expenses, and the number of dependents. This is to determine your leftover disposable income; if it is below a certain threshold, you qualify for a Chapter 7 bankruptcy.

What is considered ‘disposable income’ may vary depending on your location. Each county and metropolitan sets its own cost of living standards which is taken into the calculation to assess the amount.

Getting Started with the Process

To get started, you have to download and fill out a 122A-1 form, which you will have to submit to the court with the rest of your bankruptcy filing papers. You can download the form by clicking here. It is always recommended to fill out the information with the help of a lawyer so that there is less room for mistakes to happen.

If your income is found to be above the state median average, you will need to download and fill out a 112A-2 form as well. You will need a completed copy of the first form to fill in the details. You can download the second form by clicking here.

It is highly recommended to reach out to a bankruptcy lawyer if you have any questions or confusion regarding the form. Mistakes avoided while filling out the form can save you a lot of hassle later on.

Once you have submitted the forms, you’ll have to wait for the court decision. If you fail to pass the means test, don’t worry, you would still eligible for filing a Chapter 13 bankruptcy, which, while not giving a full discharge, can still make your debt burden more manageable.

Bankruptcy Mean Test Exemption

Dependent on certain conditions, some Americans may not need to pass a bankruptcy means test to become eligible. Disabled veterans meeting certain conditions are exempt from the mean test. In addition, reservists and members of the national guard on active duty may also be granted a temporary exemption. To qualify for an exemption, you will need to fill out and submit a supplement form along with your 122A-1. The form can be downloaded by clicking here.

Chapter 7 Bankruptcy and Inheritance

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Chapter 7 Bankruptcy and Inheritance

Chapter 7 Bankruptcy involves the trustee taking charge of all of your non-exempt assets in order to repay your creditors. A question may, therefore, arise regarding the status of any inheritance you receive before or after you have filed for bankruptcy. This article will educate on all the essentials concerning Chapter 7 Bankruptcy and Inheritance.

Inheritance Before Bankruptcy Filling

Any inheritance you receive before filing for bankruptcy will be counted towards the bankruptcy estate if you are unable to receive an exemption on it. You should be aware that the entitlement date is often considered as the date the benefactor passed away and not the date you actually receive the transfer of the assets. Hence, if you had filed for bankruptcy after a person passed away but you haven’t yet collected on your inheritance, it will be still be counted in the bankruptcy estate.

Inheritance After Bankruptcy Filling

If you inherited any form of assets after you filed for bankruptcy, it is yours to keep and will not be handed over to the bankruptcy trustee. An exception to this is the situation in which you are entitled to it within 180 days of your filing.

In this case, it would become part of the bankruptcy estate if you are unable to exempt it. The 180-days rule was enacted by Congress to prevent the abuse of Chapter 7 bankruptcy by people looking to file in anticipation of receiving a significant inheritance.

In addition to the trustee laying claim to your inheritance, you will also be required by the court to amend your paperwork to account for the transferred assets. This holds even if the court has closed your case. The type of form you will need to fill out will depend on what form of assets you inherit.

  • If the inherited asset is real estate property, you will need to amend Schedule A.
  • If the inherited asset is money or personal property, you will need to amend Schedule B.
  • In either case, if you want the asset(s) to be exempt, you will also need to amend Schedule C.

Non-Filing Spouse and Inheritance

If your non-filing spouse inherited any assets during or before your bankruptcy, it would be considered separate property and not counted towards your bankruptcy estate. However, should they decide to transfer ownership of the inheritance, it will then could count towards your estate and thus, could be claimed by the trustee.

Hire a Professional Attorney

If you have received an inheritance and want to keep it safeguarded from your bankruptcy case, it can be worthwhile to take the advice of a professional bankruptcy lawyer to better understand your options. For a free consultation with a seasoned attorney, book an appointment online or call at 512-640-3340.

Bankruptcy for Military Personnel – Things You Need to Know

As part of the US armed forces, you enjoy certain benefits while filing for bankruptcy that is not available to civilians. However, there also includes a certain drawback. Here is all the essential information you need to be aware of regarding bankruptcy for military personnel.

Servicemembers’ Civil Relief Act

Actively duty service members are provided many legal protections against civil action through the Servicemembers’ Civil Relief Act (SCRA). As long as you are on active duty, any legal action relating to bankruptcy proceedings will be postponed by the court. In should be noted that this protection is separate from a bankruptcy automatic stay period and doesn’t impact its duration.

Mean Test Exclusion

To qualify for a Chapter 7 bankruptcy, a debtor has to pass a mean test. In some cases, disabled veterans, reservists, and national guard members may be exempted from the test whiling filing.

Disabled Veteran

Meeting certain conditions, disabled veterans can qualify for Chapter 7 Bankruptcy without having to pass a mean test. The requirements for the exemption are as followed:

  1. The debt must have been primarily incurred while the debtor was on active duty or engaged in a homeland defense activity.
  2. Have a disability rating of at least 30% or had been discharged from active duty as a result of the disability.

Reservists and Members of the National Guards

Reservists in the Armed Forces or members of the national guards who have been on active duty or engaged in a homeland defense activity for 90 or more days may qualify for an exemption from the mean test.

This remains true for the duration of the active duty and 540 days afterward. However, once the period ends, you will be required to take the mean test no later than 14 days after if the time had already not expired in this regard.

Filing for Bankruptcy may Affect Your Security Clearance

A downside for military personal filing for bankruptcy is that it may affect their security clearance. However, this is not automatic and differs on a case-by-case basis. There are a lot of factors involved that influence whether filing for bankruptcy will affect your security clearance. Such can include your performance report, your relationship with your superiors and the total amount of debt that you have.

Sometimes, filing for bankruptcy may actually be beneficial as it will be viewed by your superiors as a positive step towards financial responsivity. Before filing for bankruptcy, it is always recommended that you ensure that it is not going to have an adverse effect on your security clearance. A bankruptcy lawyer can be an aid in this regard as well as help you arrive at a more favorable outcome at the end of the process. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.

Senior Citizens Here’s What You Need to Know Regarding Bankruptcy

Due to inflation and rising medical cost, it is no surprise that bankruptcy among seniors is on the rise. However, compared to other debtors, there are some advantages that senior citizens enjoy in regards to bankruptcy. If you are elderly seeking debt relief, here’s what you need to know regarding bankruptcy.

Your Retirement Accounts are Exempt

For an asset to be exempt means that they are legally protected from creditors during a bankruptcy case. In most cases, this includes your retirement accounts. This holds true even when filing for Chapter 13 bankruptcy and the balance in them does not affect the amount you have to pay in the court issued repayment plan. For information on retirement accounts and bankruptcy, visit this article.

Most of Your Assets May be Judgement Proof

While exemption laws may vary from state to state, virtually all exempt such things as social security and retirement benefits, your car, household goods, and most primary residence. Since these are assets that creditors cannot legally go after, they are said to be judgment proof.

Most senior citizens typically only own these types of assets. This basically means that even if your creditor gets a judgment in a bankruptcy case, they cannot collect from. Thus, if you know that most or all of your assets are judgment proof, declaring bankruptcy could be a good way to stop their harassment and wipe out your debt without much penalty.

When Bankruptcy May Not be a Good Choice?

If you have plenty of equity and income that isn’t legally exempt than declaring bankruptcy would not make sense. Chances are that you are likely to lose an amount equal to the value of the debt you own if you file for a bankruptcy case plus end up paying on top of that the legal charges for making the case.

However, it is important to calculate realistically how much you are bound to lose in a bankruptcy case and getting a debt discharge vs. not filing and remaining burdened with mounting debt. In some cases, you’ll have more to lose in the long term by not filing. A consultation with an experienced lawyer is necessary to arrive at a clear picture of the bankruptcy prospects and whether it would make sense to file it or not.

Take Help From a Seasoned Attorney

Navigating through the bankruptcy process can be difficult alone, more so for the elderly. A seasoned bankruptcy lawyer is essential to getting the most favorable outcome out of the process.

At the Law Offices of Sean T. Flynn, PLLC, in Austin, TX, I provide personalized legal service to my clients filing for bankruptcy under Chapter code 7 and 13. With over 8 years of experience in the field, I will assist you in mitigating your financial troubles. To schedule an appointment, call 512.640.3340.

How to Recover After Bankruptcy

Most of us hope that we never experience bankruptcy; however, there is no telling when we could become its victim. Bankruptcy might be a taboo word for most people, but it isn’t new – it is a fact of life. Despite what people might say, it is possible to recover from it. Here is how you can get back on your feet after bankruptcy.

·        Determine What Went Wrong

There is always a reason why an individual declares bankruptcy. To ensure that you don’t experience the same problems again, determine what went wrong. Here are some common reasons for declaring bankruptcy:

Medical Debt

Most people in America file for bankruptcy due to medical debt, and that is why it is essential to have health insurance coverage.

Loss or Reduction of Income

Loss or reduction of income can make things very difficult for you. If this was the reason behind your bankruptcy, you would have to manage your expenses better in the future.

·        Create a Budget

Following bankruptcy, you should create a budget. When creating a budget, set realistic restrictions on your spending and see your financial plan as a road-map to help you accomplish your savings goals. Set a goal of limiting all your expenses to 50 percent of your income. You can be flexible with your budget and adjust it as your financial circumstances change over time.

·        Pay all Your Bills on Time

Bankruptcy may have discharged your larger debts, but you will still have some financial obligations. If you want to recover, you will have to pay your bills on time and avoid defaults or late payments, although it might be hard. Making late payments can have a negative impact on your credit report. Not only that, but this will also make recovering after bankruptcy more difficult for you.

·        Rebuild Your Credit

You will have to rebuild your credit rating after some time, especially if you want to buy a new car, home, or invest in the future. Don’t try to rush into this; only take on debt that you can afford to pay off quickly. If you already owned a home and were able to keep it during bankruptcy, make sure to make timely repayments every month. Try to avoid products that lead you towards bankruptcy. For example, if you got into trouble because of credit card debt, then you should avoid applying for a credit card to re-establish your credit rating.

Final Thoughts

Bankruptcy isn’t the end of the world. If you stay positive and do everything we have discussed above, you should be able to recover from it and return to normal life. For questions and queries, feel free to reach out to us.

Get A Fresh Start

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