The past few months have seen a severe uptick in Chapter 13 bankruptcy issues coming to us from Westchester consumers.  Perhaps it’s the high volume of home ownership in Westchester that’s bringing people to an attorney looking for relief.  Maybe it’s the unemployment rate coupled with a high cost of living that’s so prevalent in Westchester.  Regardless, my office seems to be handling more Chapter 13 bankruptcy cases there than in a long while.

Though our office is in midtown Manhattan, lots of people commute from Westchester and are happy to come see us either during lunch or after work.  It seems that the prospect of meeting with an attorney well-experienced in Chapter 13 bankruptcy cases not only from a legal perspective, but also from experience in the local court, is powerful enough to make them miss lunch or risk being late for dinner.  To help our many Westchester clients who are interested in Chapter 13 bankruptcy as a way of resolving their bill problems, I though it would be useful to provide these 9 tips for a successful case.

Do your homework. You’re not a chapter 13 bankruptcy attorney, but that doesn’t mean you should be completely uninformed about the process.  Sites such as Bankruptcy Law Network provide excellent information and background on not only Chapter 13 bankruptcy, but about debt relief options in general.  Also check out the U.S. Court System‘s website for some excellent help.  Take the time doing as much of the legwork as you can so that you’ve got an idea about your options before you go to a lawyer.

Take a look at your budget. Chapter 13 bankruptcy involves a repayment plan that stretches over a 3-5 year period of time.  That time period, as well as the amount you’re going to need to repay, depends in large measure on your income.  Your Chapter 13 bankruptcy attorney will use your income to see the amount of money the court will want you to repay, so it’s a good idea for you to work out your monthly expenses so you’ll be able to tell if the repayment number is realistic for you.

Your payroll deductions count. If your Chapter 13 bankruptcy attorney tells you that your repayment amount will result in your creditors getting less than payment in full of what you currently owe, the Chapter 13 trustee is going to demand that you turn over the majority of your federal and state tax refunds for the entire 3-5 year period of time.  Therefore, you may want to speak with your accountant about what your paycheck would look like if you balance out the scales and don’t withhold more than is absolutely necessary to receive no refund nor owe any money at the end of the year.

Assemble the documents. Most Chapter 13 bankruptcy attorneys are going to ask you for what seems like a ton of paperwork and information in order to assess your situation and see if you’re qualified for Chapter 13 at all.  As I mentioned earlier, Westchester has a pretty high cost of living, which figures into how the Plan payments are figured out.  In my office, I usually ask for your “source documents” rather than asking you to fill out lengthy questionnaires because most of my clients in the past 15 years have found those questionnaires to be nearly impossible to figure out.  Other Chapter 13 bankruptcy attorneys who help Westchester residents do it differently, so you may want to ask that in advance.

Be honest and up-front with your lawyer. I could tell you some scary stories about people in Westchester who filed for Chapter 13 bankruptcy and ended up in a heap of trouble because they weren’t 100% honest.  I could tell you about the criminal penalties, jail time and enormous legal fees that plagued them as a result of omitting some critical fact.  I won’t do that because it will just make you nervous about the process.  So just be 100% honest and up-front when you speak with an attorney.  Trust me on this one – it’s for the best.

Be ready for the first payment. When you file for Chapter 13 bankruptcy in Westchester, your case is filed in the U.S. Bankruptcy Court for the Southern District of New York.  Though some parts of the country require the person filing for bankruptcy to make the first Chapter 13 bankruptcy Plan payment within the first 10 or 15 days of filing, you’ll have to have yours in within 30 days of the date your case is filed..  That doesn’t mean you have to mail it within 30 days – it means the money has the get there no later than 30 days after filing.  So it’s a good idea to have a few dollars in the bank towards the payment.

Payments for Chapter 13 bankruptcy cases filed in Westchester must be sent to Jeffrey L. Sapir, Esq. Trustee, 399 Knollwood Rd., Suite 102, White Plains, NY 10603.  You must send either a bank check or a money order – personal checks aren’t accepted.

Keep paying for the car and home. Some parts of the country handle your new car and mortgage payments through the Chapter 13 Plan.  As your Chapter 13 bankruptcy attorney will tell you, that’s not the case for Westchester filers.  Rather than giving the Chapter 13 bankruptcy trustee that much control, you’re going to be responsible for making direct payments on these debts.  You will be required to make your first payment on the car and the mortgage on time for each and every month of the case, and a failure to do so will lead to the possible loss of the property.  Your Chapter 13 bankruptcy lawyer may help you time the filing of your case to maximize the chances of you being able to make those payments.

Plan ahead for taking some time off. You will typically have to attend two hearings – the first is the meeting of creditors and the second is the Hearing on Conformation – in Chapter 13.  Your Chapter 13 bankruptcy attorney will not only prepare you for the appearances, but will also be there by your side.    They’re pretty simple (especially if your bankruptcy papers are prepared properly) but you will need to be there.  You will find out the dates when your case is filed, so be sure to arrange it with your employer well in advance of time.

Stay focused on the goal. Chapter 13 bankruptcy isn’t a walk in the park – it requires focus and dedication to get through it.  You’re going to be making payments, keeping in constant contact with your Chapter 13 bankruptcy attorney, and trying to make ends meet in Westchester all at the same time.  It’s a daunting task, but working together with your Chapter 13 bankruptcy attorney you’ll have a far better chance of success.

Have you been through Chapter 13?  What sorts of challenges did you come across?

Check Out These Related Posts:

1. NY Bankruptcy Attorney Files Without Client’s Permission?

You think bankruptcy is for the poor and middle-class, and that the officials you elect are somehow above the problems that plague the rest of us “normal” people.  They walk on air, have special privileges, and would never be in your shoes.

After all, filing for bankruptcy is like losing in the game of life.  Right?  Not so much, it seems.

In a move that proves even the most famous people in town are merely a few calamities away from the bankruptcy court door, the mayor of Surprise, Arizona recently filed for bankruptcy.

How could such a thing happen?  Judging by news reports about the filing, Mayor Lyn Truitt was in debt to the tune of  $464,000 in mortgage, credit card and other debt when he filed his case on December 22, 2010.  The Mayor of the town of just about 90,000 makes $34,000 as mayor (my mother would say, “Don’t spend it all in one place!”) and was apparently doing alright until he was hit with the one-two punch that leads so many people into bankruptcy.

His wife died of pancreatic cancer and the real estate downturn knocked out his side business as a real estate broker.  So not only did he lose the second household income, but the medical bills were overwhelming.

Sound familiar?

“It’s very humbling,” Truitt said. “It’s a pretty major turn around in my life.”  But the experience has perhaps made Truitt more savvy to the problems people are facing every day.

“There are people across this nation that are in exactly the same situation I am through no fault of their own,” he said. “I think they’re going to realize I’m a regular person and affected by this economy just like everybody else.”

By the way, Truitt’s up for re-election this year.  It will be interesting to see how he handles his financial issues as he confronts his opponents.

Photo credit:  City of Surprise, AZ

Check Out These Related Posts:

1. Financial Management Course Before Discharge In Bankruptcy

Many people who need to file bankruptcy have other financial issues swirling around them as well, and taxes seem to loom the largest. Some have outstanding tax debts, whereas others simply haven’t filed tax returns in years. Depending on your mindset, this may or may not be a problem for you.

Income Disclosures In Your Bankruptcy Papers

As part of the Statement of Financial Affairs you’re going to need to account for your income over the past two years. That means you’re going to need to get your hands on that information, and tax returns are typically the fastest place to look. A lack of a completed return will surely make the task more difficult, but that’s easily fixable.

Income Tax Returns In Chapter 13 Bankruptcy

The problem in terms of filing bankruptcy, however, comes if you’re filing Chapter 13. Under the U.S. Bankruptcy Code (11 USC 1308) you’re required to have tax returns filed for all taxable periods ending during the 4-year period ending on the date of the filing of your bankruptcy case – and you’ve got until the day before your meeting of creditors to get it done. So if you’re behind the times, filing-wise, and don’t have everything lined up you’re going to run into some severe problems in a Chapter 13 scenario.

Depending on where you file for bankruptcy, your local rules may also require that you provide copies of tax returns to the trustee assigned to your case. Without those filed returns, the trustee may have a bone to pick with you – and that will ultimately go to the judge.

Income Tax Returns In Chapter 7 Bankruptcy

If you’re filing Chapter 7 bankruptcy then you may have problems if you haven’t filed your tax return for the past year.  Under the U.S. Bankruptcy Code (11 USC 521(e)) you’ve got until 7 days prior to the meeting of creditors to provide the case trustee with a copy of your most recent tax return.  If you’ve been diligent about your obligations this should be a snap, but if you’re sending along a 5 year old return yet showing current income then under  11 USC 521(f) you may be required to file with the court copies of your tax returns that are past due; you may also be required to file them with the court on a going-forward basis for some period of time.

Unfiled Income Tax Returns Mean No Discharge

On a larger scale, when you don’t file your tax returns prior to going into bankruptcy there’s going to be an issue with respect to how those debts are handled in the case.  Not only won’t unfiled tax debts be discharged in a Chapter 7, they won’t be paid out in a Chapter 13.   It’s a better idea to file your returns before walking into bankruptcy court so that your lawyer can help you deal with those potential obligations now rather than having them loom larger later.

Check Out These Related Posts:

1. Can My Taxes Be Discharged In Chapter 7 Bankruptcy?
2. Rapid Refund For Your Taxes? Think Again.
3. Earned Income Tax Credit In New York Bankruptcy Cases

If you’ve filed for Chapter 13 bankruptcy in New York, or are thinking of filing Chapter 13 bankruptcy, you’re probably worried about what happens to your Chapter 13 Plan if your fortunes take a turn for the worse. After all, Chapter 13 bankruptcy will stop creditors from harassing you and allow you to keep your property, but it can still be a struggle for to keep up with the Plan if anything happens to reduce your income.

Even if you could easily afford the payments when your Plan was confirmed, unforeseen circumstances like a job loss or a health problem could make it impossible to keep up with the payments. If you can’t keeping making your Chapter 13 Plan payments U.S. Bankruptcy Code has a provision called a Hardship Discharge that provides relief for debtors who can’t continue with a Chapter 13 bankruptcy.  The hardship discharge is provided for in 11 U.S.C. 1328(b).

If you can’t complete the repayment plan, consider asking the court for a hardship discharge. In most cases, the discharge is only available when the following conditions are met:

• Through no fault of your own, you have experienced circumstances that are beyond your control that makes it impossible for you to continue to make plan payments.
• The payments made so far in the Chapter 13 Plan are at least as much as each creditor would have received in a Chapter 7 bankruptcy liquidation case.
• The repayment plan can’t be modified to allow you to continue making payments at a lower amount.

When the hardship is short-term, the courts in New York prefer that you work to modify your Chapter 13 Plan to call for a lower amount than was originally agreed upon until your situation changes.  Given the difficult circumstances that so many New York consumers find themselves in these days, many of the judges are giving a close look at the hardship discharge as a way to move the case forward rather than risking dismissal or conversion to Chapter 7.

If you’ve experienced an illness or injury, your income could have been reduced dramatically or you may not be able to work at all. In some cases, you might not have any money left over once your basic living expenses are met. In fact, you might not even be able to meet those costs. In this case, a hardship discharge may be the answer. It will eliminate any debts that are dischargeable in a Chapter 7 bankruptcy.

Image credit: BenSpark (Flickr)

Check Out These Related Posts:

1. Chapter 13 Bankruptcy Hardship Discharge
2. Chapter 7 Bankruptcy After Denial of Discharge
3. Denial Of Discharge In Bankruptcy

If you’ve got a default judgment against you for an unpaid credit card debt, personal loan, medical bill, or similar debt then you may be thinking that filing for bankruptcy will solve the problem.  New York consumers may want to seriously consider the full story first.

A default judgment is a common reason for New York residents to consider filing for bankruptcy. In New York a judgment creditor has the right to freeze your bank account, take part of your wages, and continue to add interest on the amount due at a statutory rate until the debt is paid in full.

If you’re living paycheck-to-paycheck as is, the prospect of having to surrender a portion of your income isn’t appealing.  And given the high cost of living in New York, every dollar counts.

It’s true that filing for bankruptcy will stop the income execution (wage garnishee), lift the hold on your bank accounts, and give you some breathing room.  But even the bankruptcy discharge won’t eliminate the impact of that default judgment against you.

A judgment is a matter of public record, and creates a statutory lien on any real estate you own as of the date on which the judgment is filed.  Your bankruptcy may eliminate your personal liability for payment, but if you own any real estate then that judgment will still need to be paid in full (plus interest) when you sell the property.

The only way around that lien is to file a motion with the court during your bankruptcy case.  Whether the facts and circumstances of your situation warrant such an action (or whether the motion would be approved) is up to you and your lawyer.

Even for those who don’t own any real estate at the time the default judgment is entered, filing for bankruptcy will not wipe out the civil court judgment itself.  The judgment will remain as a hollow shell, on file with the civil court (and on your credit report) until some action is taken.

Under New York law (not bankruptcy law) you can file a motion with the civil court to mark the default judgment as discharged, but only after a year has passed since your bankruptcy has been discharged.  Your bankruptcy lawyer may be able to handle this for you, but most lawyers don’t consider that as part of the process of filing for bankruptcy in New York.  Therefore, you want to make sure to discuss this with your attorney.  If necessary, you’ll want to meet with another lawyer who will handle this for you.

Image credit:  Paul Jacobson (Flickr)

Check Out These Related Posts:

1. Filing For Bankruptcy When You’re Being Sued On A Debt
2. Citibank Drops Universal Default Interest Rate Hikes
3. Filing For Bankruptcy? Keep Your Loved Ones Healthy.

When a potential client is sitting in front of me and contemplates filing for bankruptcy, they often ask about the impact of the proceeding on their immigration status.  If you’re a permanent resident of the U.S. or a visa holder, you need to know how filing for bankruptcy will impact you – and what you need to discuss with your immigration lawyer.

Many permanent residents and those on visas are deep in debt and considering either Chapter 7 or Chapter 13.  Thankfully, there’s nothing in the immigration or bankruptcy laws that make life difficult for those who have filed for bankruptcy.  Your naturalization papers don’t ask if you’ve filed for bankruptcy, nor do your bankruptcy papers ask you about your immigration status.

The only thing that may impact your immigration is your moral character.  There was a time when being in debt may have been evidence of living outside of the general standards of the community, but with over 1 million people filing for bankruptcy each year any such argument would be unlikely.  In fact, there’s a pretty good chance that your immigration hearing officer or someone close to them has experienced bill problems of their own.

In fact, there’s some evidence that being in debt and letting it stew without taking any action may negatively impact your immigration status.  When you file for citizenship there’s a question that asks about whether you owe any federal, state or local income tax debts.  If you do then you’re going to have some explaining to do before you take the oath.

In addition, willfully failing or refusing to pay child support may be considered evidence of poor moral character under 8 C.F.R. § 316.10(b)(3).  That, too, will stand in the way of your ability to become a U.S. citizen.  By filing for bankruptcy under Chapter 13, however, you may be able to reorganize and repay those child support debts and show you’ve mended your ways.

The upshot is this – it’s better to be out of debt than in debt.  The U.S. government recognizes this, and doesn’t want to stand in your way.  If you’re an honest person and in debt, filing for bankruptcy will leave you in a better financial situation.  That, in turn, will make you more likely to be a productive member of society and less likely to need to rely on the government for financial assistance in the future.

Photo credit:  hmerinomx (Flickr)

Check Out These Related Posts:

1. Immigration Issues and Chapter 7 Bankruptcy
2. Impact Of A Bankruptcy On A Default Judgment

There’s been a ton of interest lately among people who are filing for bankruptcy in New York on the topic of robo-signers in foreclosure actions.  These are the automatically-generated foreclosure affidavits being spit out by the thousands, and they’ve caused many lenders to halt their actions entirely.  So I thought it would be a good idea to do a round-up of  some of the most recent and important news articles on the subject.

Foreclosure ‘Robo-Signers’ (CBS News Video)

Citigroup, Ally Sued for Racketeering Over Database

Foreclosure Slow As Document Flaws Emerge (NY Times)

Foreclosure Flaw May Cloud U.S. Home Ownership As Blighted Titles Emerge (Center for Responsible Lending)

WSJ: Bank of America Suspends Foreclosures (Wall Street Journal)

JPMorgan suspends 56,000 foreclosures over ‘robo-signing’ controversy (Fierce Finance)

Concerns Grow Over Servicers’ Right to Foreclose. Larger Implications Loom (Mortgage News Daily)

It’s Paper Chase On Foreclosures (David B. Shaev quoted) (NY Post)

Flawed Paperwork Aggravates a Foreclosure Crisis (David B. Shaev quoted) (NY Times)

Check Out These Related Posts:

1. Understanding The Reason For The New York Foreclosure Problem

Let’s say you file for Chapter 7 bankruptcy.  One of your creditors comes along and sues, demanding that their debt survive the bankruptcy.  Maybe they’ve got a good reason, maybe not.  Either way, they file the adversary proceeding in bankruptcy against you.

Your lawyer is served with the adversary proceeding in bankruptcy and gets in touch to plan a strategy for defending the action.  You load up on the defenses and your lawyer files the Answer on your behalf.

Then, A Flash Of Realization

A few weeks later your lawyer decides to ask you when you got the adversary proceeding complaint.  You tell him or her that you never got it – at least, not that you can recall.  You tear through the pile of unopened mail on the table, check out the nooks and crannies of your desk, even turn over your briefcase to find the envelope.

But it’s not there.  You never got served.  The papers went to your lawyer, but never got to you.

It’s Too Late To Do Anything About It

Jeffrey Ramson filed a Chapter 13 bankruptcy case in Manhattan, which he ultimately converted to a Chapter 7 case.  Donald Scott, one of his creditors, filed an adversary proceeding in bankruptcy seeking to deny Mr. Ramson a discharge of debt under 11 U.S.C. § 523(a)(4) (“for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny”).  Ramson filed an answer, denying the material allegations of the complaint, and raising a defense that Scott lacked jurisdiction over him.  The Answer did not assert that the summons and complaint were improperly served.

His lawyer, Stuart Gelberg, filed the Answer and then later filed a motion to dismiss the complaint.  His reason?  Suddenly, he realized that the summons and complaint were never served on Mr. Ramson.

Let’s Talk About Service

In order to sue someone, you’ve got to have personal jurisdiction over them.  The way you do that in bankruptcy court is to make sure an adversary proceeding summons and complaint is served in accordance with FED. R. BANKR. P. 7004 and FED. R. CIV. P. 4. Yesh Diamonds v. Yashaya (In re Yashaya), 403 B.R. 278, 282 (Bankr. E.D.N.Y. 2009).

According to Rule 7004(b)(9), service may be made “[u]pon the debtor, after a petition has been filed by or served upon the debtor and until the case is dismissed or closed, by mailing a copy of the summons and complaint to the debtor at the address shown in the petition or to such other address as the debtor may designate in a filed writing.” FED. R. BANKR. P. 4007(b)(9). Rule 7004(g) states that “[i]f the debtor is represented by an attorney, whenever service is made upon the debtor under this Rule, service shall also be made upon the debtor’s attorney . . . .” FED. R. BANKR. P. 4007(g). Therefore, in order for there to be proper service over the defendant in an adversary proceeding, plaintiff must serve both the defendant and defendant’s attorney. In re Shapiro, 265 B.R. 373, 376–77 (Bankr. E.D.N.Y. 2001) (citing In re Terzian, 75 B.R. 923 (Bankr. S.D.N.Y. 1987)).

Remember, you don’t need to hire a guy in a trenchcoat to stalk someone outside their office, leaping from the shadows to pounce on them and scream, “You’re served, sucker!”  For the most part, you just drop a copy into the mailbox and that’s good enough (there are some things you need to do after that, but let’s leave the technicalities to another day).

So What If Service Is Improper?

You get 120 days to serve the summons and complaint once you file the adversary proceeding in bankruptcy.  And if you don’t then the court—on motion or on its own after notice to the plaintiff—must dismiss the action without prejudice against that defendant or order that service be made within a specified time. But if the plaintiff shows good cause for the failure, the court must extend the time for service for an appropriate period.  If the plaintiff does not serve the summons and the complaint on the defendant and defendant’s attorney, the court may dismiss the case without prejudice absent a showing of good cause. In re Rand, 144 B.R. 253, 256 (Bankr. S.D.N.Y 1992).

Sounds simple, right?  Well, maybe not.  See, the New York bankruptcy court ruled in Ramson’s case that the failure to raise the defense in the Answer stripped Ramson of the ability to get the complaint dismissed for improper service.  Under FED. R. CIV. P. 12(h)(1)(B), a party waives certain defenses, including insufficient process, by “failing to either: (i) make it by motion under this rule; or (ii) include it in a responsive pleading.”

In other words, the court has to dismiss the case for lack of proper service or order that service be made within a specified time – unless the defendant has filed an Answer.  In such case, the court can take a hands-off approach to the issue in favor of the defendant (here, Mr. Ramson) bearing the burden.

One More Reason For A Clear Dialog Between The Bankruptcy Lawyer And Client

Your bankruptcy lawyer can’t read your mind.  If there are legal pleadings filed in your bankruptcy case he or she may assume that you got a copy.  Maybe it’s a good assumption to make, maybe not – either way, sometimes your lawyer may jump to the conclusion because he or she got a copy in the mail.  And here, maybe Ramson’s lawyer should have asked the question.

In addition, you’ve got to be an active participant in your own bankruptcy case.  If your bankruptcy lawyer calls to tell you that he or she got a motion and you’ve never heard of it before, say something.  This is your bankruptcy case, not just a proceeding in which you are a passive bystander.

Take the time to talk with your lawyer.  It will serve you well every time.

You can take a peek at Scott v. Ramson here.

Check Out These Related Posts:

1. Filing For Bankruptcy When You’re Being Sued On A Debt
2. Which Chapter of Bankruptcy To Choose When A Car Is Involved
3. Filing For Bankruptcy In New York Takes 5 Minutes

The Bankruptcy Code severely limits your ability to discharge “domestic support obligations” in bankruptcy.  But what if part of the award is for legal fees that your former spouse incurs in getting you to pay for child support or spousal maintenance?

Michael Schenkein filed a Chapter 7 bankruptcy in Manhattan after what appears to be a long battle with his former spouse in numerous domestic support enforcement proceedings regarding his failure to pay the obligations imposed by their divorce settlement agreement. His ex-wife then filed an adversary proceeding in the bankruptcy court seeking to have the debts due to her classified as nondischargeable as domestic support obligations.

Those debts included not only the actual maintenance and child support obligations, but also legal fees to his ex-wife in connection with her state court actions against him. In other words, the New York state court told him to pay her legal fees for chasing him down.

Legal Fees Payable As A Result Of The Divorce And Contempt Actions

The U.S. Bankruptcy Court for the Southern District of New York, in the case of Mordas v. Schenkein, 09-01947 (AJG) (Bankr. S.D.N.Y. 2010) looked solely to the law to hold that not only was Mr. Schenkein on the hook for the maintenance and child support obligations but also his ex-wife’s legal fees. The court did, however, leave the door open for the former Mrs. Schenkein to get even more legal fees from her ex-husband.

To render the decision as to the legal fees, the bankruptcy court looked solely to 11 U.S.C. § 523(a)(5) and (15).  § 523(a)(5) provides that debts relating to a “domestic support obligation” are precluded from discharge, while under § 523(a)(15) any debt owed to a spouse or child that is “incurred by the debtor . . . in connection with a separation agreement . . . or other order of the court of record” is non-dischargeable.  Here, the legal fees were awarded to Mr. Schenkein’s ex-wife as a result of contempt actions she took because he wasn’t paying the original debt or the arrears due.  The state court had made clear that the legal fees awarded were intended to compensate her for the costs incurred as a result of the his failure to meet his support obligations.

Moreover, since BAPCPA, bankruptcy courts in New York have recognized that attorney’s fees awarded in a divorce proceeding are non-dischargeable under § 523(a)(15) regardless of whether or not the fees are considered to be in the nature of support or for some other purpose.

Legal Fees In Connection With Filing The Non-Dischargeability Action

None of this is stunning to the bankruptcy lawyer who bothers to read the Code and decisions issued by the New York bankruptcy courts.  What does bug me, however, is the fact that the judge specifically left open the door to the debtor’s ex-wife going back into state court and tacking on even more legal fees in connection with her lawsuit filed in bankruptcy court.

Judge Gonzalez notes that any legal fees ordered in connection with the bankruptcy lawsuit would be post-petition debts not subject to the bankruptcy discharge.  That’s true enough, but he goes the next step and dismisses out of hand the question of whether Schenkein should be ordered to pay such amounts at all.

As a general rule, attorney’s fees should not be awarded to the prevailing party in an adversarial proceeding. See In re Sokolowski, 205 F. 3d 532, 533 (2d Cir. 2000). In a case involving “issues peculiar to federal bankruptcy law, attorney’s fees will not be awarded absent bad faith or harassment by the losing party.” Id. Here, Gonzalez states that “the issues at hand were primarily, if not entirely, related to federal law. Therefore, this Court does not grant the Plaintiff’s request for attorney’s fees.”

He then says:

However, this Court does recognize that this action was initiated in order to maintain enforceability of the numerous state court rulings ordering the Defendant to pay all debts owed to the Plaintiff. As a result, there may be grounds for a New York court to award the Plaintiff attorney’s fees under DRL sections 237(c) and 238, if the Plaintiff decides to bring such an action in that court.

The upshot is that we’ve got a debtor in Chapter 7 bankruptcy facing debts that can’t be discharged.  And now he’s going to be looking at the potential of more fees after his bankruptcy is discharged.  Not only fees due to his ex-wife, but also to his own lawyer for defending him in state court when she sues.

How To Limit Your Post-Bankruptcy Exposure In Domestic Support Obligation Disputes

First off, let’s be clear on one thing – I do not have any particular insight as to how Mr. Schenkein’s lawyer handled his case.  I don’t know what went on behind the scenes, or if there were any negotiations.  But it seems to me that his bankruptcy lawyer should have known about how this was all going to play out.  And with that in mind, it seems logical to do something lawyers don’t like to do – get on the phone.

Getting on the phone and calling the ex-spouse’s lawyer would be a great way to avoid all the legal turmoil in the first place.  Be upfront about it, and acknowledge that the debt isn’t going anywhere in bankruptcy.  Sign an agreement if need be acknowledging it, and move on.

What happens in such a case?  Does the debtor lose?  Not at all.  The debtor merely comes to the table with the realization that the bankruptcy isn’t going to discharge the domestic support obligations.  In doing so, he saves himself the possible post-bankruptcy action in state court which will likely result in nothing more than more legal fees out of his pocket.

You may download the Mordas v Schenkein decision here.

Check Out These Related Posts:

1. Bankruptcy Forms Don’t Make For Higher Legal Fees
2. New York Bankruptcy: How Much To Pay In Legal Fees?
3. Chapter 7 Bankruptcy – Average Legal Fees In New York

You’re thinking about filing Chapter 7 bankruptcy, but you’ve got property (either real estate or personal property) that you inherited. You’re concerned that you will lose it if you file for bankruptcy.

Fair enough. Simply put, the New York bankruptcy exemptions will apply to determine whether you will lose it. If the value falls within the statutory limits then you’re home-free; if not, then filing Chapter 7 bankruptcy will result in the loss of the property.

A few myths need to be dispelled about inherited property.

• It doesn’t matter if you bought the property or inherited it.  It doesn’t matter if it was a gift or came to you through purchase.  Once it’s yours, it’s yours.
• The item is considered to be yours even if you didn’t have title officially transferred to you.
• Filing Chapter 7 bankruptcy may impact the rights of any co-owners of inherited property.  If there is a co-owner and you are required to surrender to the trustee, they will lose ownership as well (of course, the trustee will be required to pay them a share of the sale proceeds – so all is not lost).
• It doesn’t matter if you give back the inherited property before you file your case.  In fact, it could be considered fraud to do so.

The good news is that there may be options for you.  If the value is so high that you would be forced to surrender it in Chapter 7, you may want to look into Chapter 13.  This will let you keep the inherited property but you will be required to pay back a portion of your debts over a 3-5 year period.  You will need to figure out whether you qualify for Chapter 13 but, assuming you do, it may be a good option to consider.

It’s a thorny issue, to be sure.  That’s exactly why you need to have a firm idea of the value of the inherited property before you meet with a lawyer to discuss your situation.  Doing so will allow the attorney to assess your situation and help you decide whether filing Chapter 7 bankruptcy will spell trouble for any property you own.

Photo credit:  crazysanman.history (via Flickr)

Check Out These Related Posts:

1. Chapter 7 Bankruptcy – Trustee Can Take Non-Exempt Property With Force
2. Filing For Bankruptcy? Keep Your Loved Ones Healthy.
3. Filing For Bankruptcy Twice In 6 Months? Not So Fast.