Core Proceedings and the Bankruptcy Court

Let’s say you’re having a really, really, bad week. You were injured in a car accident, the extension the contractor put on your house fell apart and now you’re suing him for breach of contract, your wife just found out about your (latest) girlfriend and has filed for divorce, and you can’t pay your creditors, so you just filed a Chapter 7 or Chapter 13 bankruptcy. In the middle of reeling from all of this you think to yourself, when I get into bankruptcy court, is the judge going to decide the liability, breach of contract and divorce cases too?

Good question.

When you file for bankruptcy, it is important to understand what matters the court will decide and what matters it won’t decide. Knowing the extent of the court’s  jurisdictional authority is one reason why it is important that you hire competent bankruptcy counsel to represent you. We have offices throughout Oregon and in Washington State. Our attorneys are experienced bankruptcy attorneys and they know the law.

The Bankruptcy Court’s Jurisdiction. Core Proceedings.

Bankruptcy courts are courts of limited jurisdiction. That means that they do not hear and decide everything and anything. Congress granted bankruptcy judges jurisdiction over certain issues, which are called “core proceedings.” A bankruptcy judge’s decisional power is generally limited to bankruptcy matters.

Core proceedings are proceedings or issues that are entirely related to the bankruptcy case. The bankruptcy judge has the power to hear and decide these matters and enter judgment on them. Some examples of core proceedings are: the bankruptcy trustee’s duties, matters concerning debtor exemptions, or proceedings to determine, decide or recover fraudulent transfers. There are many more, but this should give you some idea of what the bankruptcy court will hear and decide.

Non-core Proceedings.

Non-core proceedings are issues that arise in a bankruptcy case that are not technically bankruptcy matters. These are called “non-core proceedings.” Examples of non-core proceedings in our fact pattern above would be your divorce, the car accident and the breach of contract action against your contractor. These matters are not governed by bankruptcy law but by other state laws and they are not directly related to your bankruptcy.

However, that does not mean that the bankruptcy court cannot hear and decide issues that may be non-core proceedings yet are matters directly related to your bankruptcy. For example, in our fact pattern above, while the bankruptcy court will not decide your divorce (in other words, it won’t enter a dissolution of marriage), it may decide issues in the divorce case that are related to your bankruptcy— like division of the marital property.

If the bankruptcy judge makes a decision in a non-core proceeding, that decision cannot become a final judgment unless all parties consent. If the parties don’t consent, then the bankruptcy judge must submit proposed findings of fact and conclusions of law to the Superior or Circuit court.

We Know the Law!

If you find any of this confusing, don’t worry. We are bankruptcy attorneys with offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. We offer free consultations and we can help you. To set up an appointment, call us toll free at: 1-800-682.9568.

What the Automatic Stay Can and Cannot Do

 

One of the immediate benefits of filing bankruptcy is the relief that the Bankruptcy Code’s “automatic stay” gives to a debtor. The automatic stay brings all collection efforts against the debtor to a screeching halt. It prevents creditors from collecting on their debts until discharge, the case is closed, or the stay is lifted. The automatic stay goes into effect immediately— without need for a court order —and it applies to all of the chapters of the Bankruptcy Code. It has a very broad reach. But it’s reach is not limitless.

As you might expect, there are many things the automatic stay can do, but there are also some things it cannot do.

Let’s take a closer look at the powers of the automatic stay.

What the Automatic Stay Can Do.

The automatic stay is found in Section 362 of the Bankruptcy Code. It prevents creditors from taking pretty much any action outside the supervision of the bankruptcy court that would give one creditor an unfair advantage over any other creditor.

Here are just two of the things the automatic stay prohibits:

  • Anyone from bringing or continuing any judicial, administrative, or other action or proceeding against the debtor that either was commenced before the bankruptcy was filed, or which could have been commenced before the bankruptcy was filed.
  • Enforcement of a pre-petition judgment against the estate (i.e., the bankruptcy estate), property of the estate, or the debtor. It prohibits all collection activity including: levies, garnishments, restraining notices and all post-judgment collection remedies.

What the Automatic Stay Cannot Do.

While the automatic stay applies to many actions against a debtor, as we said, it is not limitless. Here are just three things that the automatic stay cannot do:

  • Stop criminal proceedings. The automatic stay does not apply to criminal proceedings or criminal investigations against the debtor.  
  • Prevent tax audits or some actions to collect taxes. The automatic stay does not apply to prevent tax audits, notices or demands. It does not prevent all acts to collect any tax, or to enforce, create or perfect any tax lien. It doesn’t restrict the government from continuing with any tax audits. It won’t prevent the issuance of notices of tax deficiencies or a demand for tax returns or tax assessments.
  • Last forever. Generally, the automatic stay terminates on the happening of one of these events:

1. The case is dismissed;
2. The case is closed;
3. A discharge order is entered or denied by the court;
4. The property is no longer property of the bankruptcy estate; or
5. An order is entered that terminates, vacates or modifies the automatic stay.

Understanding the automatic stay— its reach and its limits —is very important. We have attorneys in Portland, Eugene, Coos Bay, Medford, and a number of other cities in Oregon and in Vancouver and the Tri-Cities in Washington, who can explain the reach of the automatic stay to you.

We Are Here To Help You.

If you are looking for relief from collections calls and creditors coming after you, the automatic stay may give you the break you need. We are experienced bankruptcy attorneys with offices in Washington and throughout Oregon. We offer free consultations, reasonable fees, and are committed to getting our clients the relief they need. To set up an appointment, call us toll free at: 1-800-682.9568 or contact us through our website.

What to Expect in Pre-Bankruptcy Credit Counseling

The decision to file bankruptcy is not an easy one to make. Many people experience enormous distress, shame and embarrassment over their financial difficulties. Without question, declaring Chapter 7 or Chapter 13 bankruptcy is no minor decision. But it just may be the right one for you. Especially if you cannot see any way of paying off your debt in the next 5 years.

Mandatory Pre-Bankruptcy Credit Counseling.

Before you can file for bankruptcy, however, you must complete mandatory credit counseling and receive a certificate. Once you have completed the counseling and have your certificate, you must file it with the court along with your other bankruptcy forms. Credit counseling is mandatory. If you do not file a certificate of credit counseling with the court, the bankruptcy court will dismiss your case.

But why do you have to do mandatory credit counseling?

Its purpose is to ensure that bankruptcy is your only best option. In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in response to the fact that many people who were financially capable of repaying their debts were using bankruptcy to have those debts discharged. This new law completely overhauled the bankruptcy law and made a number of important changes to bankruptcy rules and procedures. One of these changes was the requirement that debtors complete credit counseling both before filing bankruptcy and prior to discharge.

The purpose of pre-bankruptcy credit counseling is to provide an impartial look at whether or not a debtor really needs to file for bankruptcy.

The Where, When, and What of Pre-Bankruptcy Credit Counseling.

Pre-bankruptcy credit counseling may be the most painless part of bankruptcy. It can be done in person, by phone, or online; and it usually doesn’t take more than a couple of hours.

The most important thing to remember is that you must complete the counseling before you file for bankruptcy. Upon completion, you will receive a certificate that is valid for 180 days. If you decide to file for bankruptcy, you will need to file that certificate with the court.

For your counseling session, you will want to bring with you (or have available) information about your debts and your income.

The counselor will discuss your financial situation with you and will talk to you about what non-bankruptcy options you may have. Counseling will most likely include:

  • A thorough review of your personal finances
  • A discussion of alternatives to bankruptcy
  • Personal budget plan.

The counseling will help you to understand how bankruptcy works and what you can do to avoid financial risk in the future.

We’ll Walk You Through it!

If you are concerned about whether or not you should file for bankruptcy, or have questions about what happens if you decide to file for bankruptcy, give us a call. We offer free consultations. We are experienced bankruptcy attorneys with offices in Tigard, Salem, Albany, Grants Pass, Klamath Falls, Bend, and several other cities in Oregon. We also have offices in Vancouver and Tri-Cities in Washington. You can call us toll free at: 1-800-682.9568.

What is Bankruptcy Exemption Planning?

 

The main purposes of the bankruptcy laws are to:

  • Give an honest debtor a “fresh start” by relieving the debtor of most debts, and
  • Repay creditors in an orderly manner to the extent that the debtor has property available to do so.

One of the primary ways that the bankruptcy law attains its goal of providing debtors with a “fresh start,” is by providing debtors with certain “exemptions” that protect their property from creditors and put it beyond the reach of the bankruptcy trustee.

Bankruptcy exemption planning is the process of making deliberate choices concerning a debtor’s property before filing bankruptcy, to maximize the exemption protections provided by the bankruptcy law.

Warning: Bankruptcy Exemption Planning Can Be Dangerous.

Most people who file for bankruptcy do not lose anything they own because they often file a Chapter 7 bankruptcy and everything they own is “exempt.” Or, if they have non-exempt property, they file a Chapter 13 and are able to use its “adjustment of debts” option to protect their “non-exempt” assets. But bankruptcy is not a “one size fits all” proposition, so this isn’t always the case. Sometimes a debtor may have assets that are not exempt, but cannot be protected well through a Chapter 13. That’s when exemption planning can be very beneficial.

That is not to say that exemption planning is simple. It isn’t. It consists of developing strategies for managing and positioning your assets before you file for bankruptcy so those assets are protected once you do file. Those strategies may better enable you to pay certain creditors that you want to pay, or need to pay, over others that you don’t. But there are risks associated with exemption planning. Because of the dangers associated with exemption planning, especially over-aggressive planning, bankruptcy exemption planning should always be undertaken with the assistance of experienced and informed bankruptcy counsel.

As noted above, one of the main tenants of bankruptcy law is that honest debtors should be allowed to discharge their debts, and the law provides exemptions to allow them to do so. On the other hand, bankruptcy is not meant to benefit dishonest debtors. Section 727(a)(2) of the Bankruptcy Code prohibits any debtor who attempts to defraud creditors by transfers of property, from being discharged. Clearly, then, there is a tension in the law with regard to how much you are allowed to sell or transfer before filing for bankruptcy. To properly engage in exemption planning, you will need the advice of an experienced and highly competent bankruptcy attorney to guide you as to the safest way to engage in asset protection and other strategies, and to inform you on which strategies are likely to be safe, and which are risky.

Don’t Go it Alone!

If you have assets that are not exempt but can’t be protected well through Chapter 13, or are simply considering filing bankruptcy, you may well benefit from pre-bankruptcy planning. If you are in Portland, Eugene, Coos Bay, Medford, or any other city in Oregon, we have an office near you, and we provide free initial case consultations. To schedule an appointment, give us a call or send us an email.

What Role Does Your Attorney Play in Filing for Bankruptcy

Bankruptcy is a complex process that begins before the time you file and goes straight through to the debt discharge and the period when you will begin the process of rebuilding your credit. An experienced bankruptcy attorney can help you navigate the maze of decisions, paperwork, procedure, and compliance that goes along with a bankruptcy filing.

From the beginning, your bankruptcy attorney is there to determine the right course for you and your specific circumstances. We assess your financial situation, help you to determine your financial goals, and discuss the options that are available and most appropriate for you. We can also begin taking collection calls and other creditor communications on your behalf.

One of the main tasks your bankruptcy attorney will undertake for you is the preparation and filing of your bankruptcy petition. These forms are exhaustive, and often run to 30-60 pages or more. The attorney will ensure that the forms are filled out completely and accurately in compliance with the applicable state law. Once you have reviewed the information, your bankruptcy attorney will file the finalized, signed version with the bankruptcy court.

A bankruptcy attorney will also help you determine whether a Chapter 7 or a Chapter 13 bankruptcy filing is right for you. This involves you and your attorney assessing the size and makeup of your debt, what assets you are willing to risk in a bankruptcy, and your ability (if any) to repay your debts. When you have an initial consultation with a bankruptcy attorney, here are some of the key points to go over:

  • How you can leverage bankruptcy to achieve your financial goals
  • What you can expect during the bankruptcy process
  • Any difficulties or issues specific to your case
  • Whether you should file for Chapter 7 or Chapter 13
  • What can be done to make the bankruptcy process easier for you

 

 

Pros and Cons to Chapter 13 Bankruptcy

For people who are ineligible for Chapter 7 bankruptcy, or wish to repay their debts using a repayment plan, filing for a Chapter 13 bankruptcy can be a great option. The following are some pros and cons to declaring a Chapter 13 bankruptcy.

Pros:

  • While under Chapter 13 the repayment of debts generally take place over a longer term, it’s often an advantage to have more time to budget and make disciplined payments; there can also be more flexibility on the payment terms in the context of Chapter 13. Furthermore, once you have successfully completed the Chapter 13 repayment plan, creditors cannot then obligate you to pay them in full.
  • While you can only file a Chapter 7 bankruptcy once every eight years, you can file for Chapter 13 repeatedly (every two years) if you need to (though each additional filing will show up on your credit report).
  • A Chapter 13 bankruptcy is noted on your credit score for up to seven years, while a Chapter 7 bankruptcy will remain for ten years.
  • If during a Chapter 13 repayment plan you experience a sudden and significant financial hardship like losing your job or accumulating medical bills, your bankruptcy trustee can modify the repayment plan. The court may even allow a debt discharge due to hardship.

Cons:

  • You limit your Chapter 7 options. You cannot file for a Chapter 7 if you previously filed under Chapter 13 within the last eight years.
  • A Chapter 13 repayment plan can take a long time (up to five years in some cases).
  • Since you will be repaying your debts out of your post-bankruptcy disposable income, you will have cash tied up throughout the duration of the repayment plan.

Your debts could be too high to qualify for Chapter 13. If your secured debts exceed $1,184,200, you will be ineligible for a Chapter 13 bankruptcy.

Consumer Bankruptcy: Are You Eligible?

Following the enactment of the Bankruptcy Abuse and Consumer Protection Act of 2005, debtors must pass a means test to qualify for a Chapter 7 bankruptcy. Basically, to qualify you must have little to no disposable income. The means test compares your average monthly income for the six-month period preceding your bankruptcy filing against the median income of a comparable household in your state of residence. Generally, this is not an issue since those filing for Chapter 7 likely have an income that’s significantly below the median.

Even if your income is above the median, there may still be some options. If, due to your income, you do not initially pass the means test, you then complete the means test form in its entirety. Rather than qualifying based on your income, this step entails a balancing process where your overall expenses are weighed against your income. Not all expenses are allowable under this test. But if after deducting the allowable expense from your income you are left with little to no income, you will probably be eligible to file for Chapter 7. This second step of balancing expenses against income is particularly complex, and it is strongly advised that it be conducted with the assistance of an experienced bankruptcy attorney.

Regarding Chapter 13 bankruptcy eligibility, it’s important to remember that you cannot file in the name of a business (not even for a sole proprietorship). For this reason, businesses are generally steered towards Chapter 11. However, even if you are a business owner you can still qualify for Chapter 13 as an individual and still run your business. Business-related debts can be included under Chapter 13 if they are debts for which you are personally liable.

To be eligible for Chapter 13, you must demonstrate to the bankruptcy court that you have enough income (after subtracting certain allowed expense and any required payments on secured debts like an auto loan or mortgage) to meet your repayment obligations. If your secured debts exceed $1,184,200, you are not eligible for Chapter 13.

Chapter 13 vs. Chapter 7: Which is Right for You?

When deciding whether to pursue a Chapter 7 or Chapter 13 bankruptcy, it is wise to sit down with a bankruptcy attorney and analyze your income, assets, debts, and your financial goals. For example, your situation might be such that you don’t qualify for Chapter 7, and would be better off repaying your debt over a period of time in a Chapter 13 repayment plan approved by a bankruptcy court.

A Chapter 7 is a liquidation bankruptcy designed to erase a person’s unsecured debts (e.g. credit card debt and medical bills). To qualify, you must have little to no disposable income. A Chapter 13 is a reorganization bankruptcy designed for debtors who still have a regular income and are capable of repaying at least some of their debt through a repayment plan. This is the option for those who cannot pass the Chapter 7 means test. Another reason to opt for a Chapter 13 is that it offers some benefits that a Chapter 7 does not (like the ability to catch up on mortgage payments you’ve fallen behind on). Below are some additional factors to consider.

Reasons why you might file for Chapter 7:

  • You do not have the ability to repay your debt in a repayment plan.
  • You urgently need relief from your creditors. After you file for Chapter 7, the bankruptcy court can issue a discharge order in as little as 3 months; following the discharge order, you will no longer be personally liable for any dischargeable debt.

Reasons why you might file for Chapter 13:

  • You are not eligible for Chapter 7 in the first place, or have significant debts that are not dischargeable under a Chapter 7 discharge.
  • You want to avoid home foreclosure, stop your car from being repossessed, or keep property that would be nonexempt under Chapter 7.
  • You want to repay your debt, rather than have it discharged.

Will Bankruptcy Impact My Retirement Funds?

Before we address the way that bankruptcy may or may not impact your retirement funds, we should explain the basic differences between a Chapter 7 and a Chapter 13. These are the two types of bankruptcies that are most commonly utilized by individuals. A Chapter 7 is a liquidation bankruptcy. Unsecured debts like credit card debts and medical bills are discharged under this form of bankruptcy. If you are current on your mortgage payments and your equity falls within a certain limit, you can retain ownership of your home if you were to file for a Chapter 7 bankruptcy.

 

You have to pass a means test to be able to qualify for a Chapter 7 filing. If your income is less than the median in the state of your residence, you would automatically pass this test. Getting back to the retirement question, if you are receiving Social Security benefits, they would not be counted when you are calculating your eligibility for Chapter 7 under the means test.

 

A Chapter 13 bankruptcy would be an option if you cannot pass this means test. It may also be a better choice for you even if you could qualify for Chapter 7, particularly if you are behind on your mortgage. This is a reorganization bankruptcy. Your disposable income is utilized to pay back some of your debts over a three-year or a five-year period. Mortgage arrearage could be corrected over the course of this repayment arrangement. When it comes to Social Security when you are in Chapter 13, the laws vary with regard to whether your benefits must be claimed as income, so your attorney will discuss this with you.

 

Under federal laws, virtually all retirement accounts are looked upon as exempt property when a bankruptcy is filed. The types of accounts that are exempt include 401(k)s, individual retirement accounts, 403(b)s, Keoughs, and profit-sharing plans. Most pension plans are also safe when you file for bankruptcy.

 

We Are Here to Help!

 

If you have questions about debt relief, our firm can provide you with answers. We have offices in Salem, Tigard, Albany, Portland, and other major metropolitan areas in Oregon, and we also serve clients in Tri-Cities and Vancouver in Washington. Our firm offers complimentary, no obligation initial consultations, and you can request an appointment if you send us a quick message through our contact page.

 

 

Chapter 13 Bankruptcy: Three Things You Need to Know

 

If you are in need of debt relief, you may be thinking about bankruptcy. It is important to understand the fact that there are multiple different types of bankruptcies. The ideal choice will depend upon your circumstances, so you should have some basic knowledge regarding your options. A Chapter 13 bankruptcy is one possibility, and when you absorb these three facts, you will come away with a rudimentary understanding.

 

1.) An automatic stay is granted.

 

Many people consider bankruptcy because they are being inundated with collection letters and threatening calls. When you file for a Chapter 13 bankruptcy, you get immediate relief, because an automatic stay will go into effect. This prohibits creditors from trying to collect on the unpaid debts, so you have some time to regroup as you prepare yourself for life after bankruptcy.

 

2.) You can keep your property.

 

You may assume that you have to surrender your property when you file for any type of bankruptcy. In fact, this is not the case with a Chapter 13. This is a reorganization bankruptcy rather than a liquidation. If the bankruptcy goes through successfully, you will be able to maintain ownership of your property.

 

3.) Your debts are paid back over time.

 

When you file for Chapter 13 bankruptcy, you submit a repayment plan to the court. After the basic necessities of life are met, the remaining disposable income must go toward paying back your debts. The repayment plan lasts for 3 to 5 years. Under bankruptcy laws, certain types of debts are priority debts, and they would be paid first. Nonpriority debts, like credit card bills, would be at the end of the list. Depending on the extent of your disposable income, some or all of this non-priority debt may be discharged.

 

Schedule a Free Case Evaluation

 

Now that you know a little about Chapter 13, you may want to sit down and discuss this option and other possible courses of action with a licensed bankruptcy attorney. If you live anywhere in the state of Oregon, we probably have an office near you, as we have locations in Eugene, Portland, Grants Pass, Medford, Coos Bay, and a handful of other cities. We also have an office in Vancouver, Washington. To schedule a free, no obligation case evaluation give us a call at 1-800-682-9568.