Category Archives: Bankruptcy Law

4 months ago Bankruptcy Law

The Last Resort: Bankruptcy Chapters Explained

Do you feel like you’re crushed by debt and can’t find a way out? It can weigh on you heavily and severely disrupt every aspect of your life.

There is light at the tunnel, though. You could consider filing for bankruptcy. Over 750,000 businesses and consumers filed for bankruptcy in 2018.

If you want to explore filing for bankruptcy, you should start by knowing the different types of bankruptcies.

Keep reading for the different bankruptcy chapters explained.

Chapter 7

Chapter 7 is for individuals who have a lot of consumer debt with no way to pay it back. You may have a lot of credit card and medical debts and faced a loss of income or job loss.

In this case, you can liquidate your debt and undergo financial counseling to resolve your debts. Some of your assets may be liquidated to pay the debts off.

Can you keep your home and your car in a Chapter 7 bankruptcy? In most cases, you can.

Chapter 11

Chapter 11 used by businesses or by high-net-worth people with a lot of tangible assets. Chapter 11 is a reorganization debt, rather than completely liquidating debts.

With this form of bankruptcy, businesses still have control over the operations of the businesses. A trustee is assigned to your case to plan how you will repay your debts.

Your debts are usually paid off over a three to five year period, giving you more financial flexibility. Some of your debts may be discharged.

Chapter 13

Chapter 13 can be used by individuals to resolve their debts. In this case, you can restructure your debts and get a plan to pay them off. Some of your debts, like credit cards, may be discharged and you’re on a payment plan for the rest of the debt.

Chapter 13 is usually for people who have a steady income, but they also have a lot of debt.

Are you better off restructuring your debts or liquidating them? It really depends on your personal situation. You want to talk to bankruptcy specialists who can look at your debts, your assets, and help you determine the best course of action.

Chapter 9

It may be hard to fathom, but municipalities can go bankrupt. The City of Detroit was the largest municipality to file for bankruptcy. Other than that, this is a rarely used part of bankruptcy law.

This allows towns to reorganize their debts, similar to a Chapter 13 bankruptcy. Debts are restructured and are on a schedule to be paid without cutting back on too many services for residents.

Bankruptcy Chapters Explained

No one ever wants to file for bankruptcy. However, it can be a way to get a fresh financial start and give you peace of mind.

These bankruptcy chapters explained will help you understand how bankruptcies work and how you can use them to get relief from crushing debt.

Do you want more legal advice? Check out this site often for more legal tips.

5 months ago Bankruptcy Law

A Small Business Owner’s Guide to Bankruptcy

If you are a small business owner and feel that your income is insufficient to deal with your debt, you are likely considering filing for bankruptcy protection and relief. But will bankruptcy help you achieve your goals for the business?  If so, which type would be best? This article sets forth the available options for you so when you meet with your bankruptcy attorney, you are prepared to discuss a course of action.

Three Questions You Must Answer when Considering Business Bankruptcy

First, What Are Your Goals for Your Business?

This comes down to one question:  Do you intend to close and liquidate the business, or do you intend to continue to operate your business? 

What you plan to do once your debt is discharged will help you decide whether bankruptcy is the best option and, if so, which type of bankruptcy you should file.

Second, Are You Personally Liable for any Business Debt?

If your small business is a sole proprietorship or general partnership, you are personally liable for your business debts. Also, if you personally guaranteed any business debt regardless of the type of business entity, you are personally liable for that debt.

Whether you are personally liable for business debt will factor into your decision on whether and what Chapter to file. Many small business owners find they must file two bankruptcies – one for their business, and one for themselves personally.

Third, How is Your Business Structured?

The way you organized your business dictates what bankruptcy options are available.

The Three Types of Business Bankruptcy

Chapter 11 Business Bankruptcy

Sole Proprietorship Chapter 11

Chapter 11 is available to both individual and business debtors. It is used by individual but rarely, because the requirements to file Chapter 13 are fewer and Chapter 13 is easier to navigate.

LLP, LLC, Corporation Chapter 11

Chapter 11 is the only type of bankruptcy available for businesses organized as anything other than a sole proprietorship, and that wish to continue operations rather than liquidate. 

Chapter 11 bankruptcy can be filed by both major corporations and small businesses. Although small businesses must follow most of the same rules and procedures as the large corporations, if the business owes less than $2.5 million dollars, the business can file as a “small business debtor” which streamlines the process somewhat. 

Even if your business qualifies as a “small business debtor,” filing and succeeding with a Chapter 11 bankruptcy proceeding is complicated. In order to file under Chapter 11 a business must be well-organized – you must produce the most recent balance sheet, statements of operations and cash flow, and federal tax return. With the help of your attorney, you must also develop a reorganization plan showing how your business will recover, make monthly payments to creditors, and endure strict oversight by the Chapter 11 Trustee for the duration of your plan.

Chapter 13 Business Bankruptcy

Chapter 13 business bankruptcy is not available, but because sole proprietors are considered the same entity as their business, a sole proprietor may file under Chapter 13 and use Chapter 13 bankruptcy protection to retain non-exempt assets, renegotiate secured debt, discharge both business and personal debts, and pay off past-due obligations such as sales tax over time. This will be done through the Chapter 13 plan over 3 to 5 years, depending upon the amount of debt owed and the amount of income the business has.

Sole proprietors can continue business operations after they complete their Chapter 13 plan and receive a discharge.

Chapter 7 Business Bankruptcy

Sole proprietors can file an individual Chapter 7 bankruptcy case and protect business assets using state or federal exemptions. 

Chapter 7 bankruptcy is also available to corporations, partnerships, and LLCs. These business entities can liquidate the company, but they do not qualify for exemptions (the laws that take property out of the bankruptcy state, making it unavailable to the Trustee or creditors). 

The most important thing to know about Chapter 7 is that a business filing under Chapter 7 cannot continue business operations. Chapter 7 bankruptcy discharges unsecured debts and empowers the Chapter 7 Trustee to liquidate business assets and repay the business’ creditors. Again, if you are personally liable for any business debt you as an individual are not protected by your business Chapter 7 filing. Creditors can still try to collect from you or sue you, and you will be liable for that business deb after your business receives a discharge. 

If you intend to continue business operations, you will not file bankruptcy under Chapter 7.

Consult With An Experienced Business Bankruptcy Attorney

If you are considering filing small business bankruptcy, know that evaluating the types of bankruptcy is complex.  An experienced business bankruptcy attorney can help you weigh your options, organize and file all needed documents, and make sure that neither you nor your business experiences any unintended consequences as a result of filing.

About the author:

David M. Offen, Esq.

Mr. Offen is a Philadelphia bankruptcy attorney who attended Temple University College and Law School. Mr. Offen is licensed to practice in the States of Pennsylvania and New Jersey. He is a member of the Eastern District of Pennsylvania Bankruptcy Conference and the National Association of Consumer Bankruptcy Attorneys and maintains an active blog on all aspects of bankruptcy filing and current events.

6 months ago Bankruptcy Law

Filing for Bankruptcy? What You Can Expect from a Bankruptcy Attorney

Many Americans are suffering financially. One in three Americans carry debt, with many people owing as high as hundreds of thousands of dollars to various money lenders. This debt can be crippling and prevent a true and happy day to day life.

When it comes to getting out of debt, filing for bankruptcy can sometimes be the most sensical way out. There is nothing like the relief the completion of a bankruptcy claim can bring. But as any bankruptcy attorney could tell you, beginning and working through the process is no easy matter.

That’s why having an attorney on your side who understands the process can be so vital. How can they help, and what services can they provide to you? Read on, and we’ll walk you through everything you need to know about bankruptcy attorneys.

Experience and the Ability to Evaluate

You’ve never had to file for bankruptcy before, most likely. That means this whole terrain is brand new for you, and you may have no idea how to navigate the process and move forward in an efficient manner.

This is also the most difficult time in your life and you may have trouble thinking straight. Having someone else to rely on during this difficult process can be essential to the completion of the task at hand and your mental stability.

Your attorney can fill in all the gaps of knowledge you may have in approaching your case. Unlike yourself, they’ve been through the bankruptcy process with clients countless numbers of times. They’ve studied the subject and should know the laws in and out.

They can be your well-experienced guide in applying for bankruptcy. This means you won’t have to worry about missing deadlines, or having to decode legal jargon on your home. The law can be complicated, but having someone who’s seen it all before can be a huge assistance.

Because of this experience, a bankruptcy lawyer will also be able to accurately gauge and explain the difficulty of your case to you. This will all depend on what kind of bankruptcy you’re filing for, whether you can sell any of your property, and whether you own a small business or not.

It can be best to try and find a bankruptcy attorney who has handled clients who have been in a similar situation to you in the past. An experienced attorney an even save you money, preventing you from paying fines for missed deadlines and other mistakes.

Services a Bankruptcy Attorney Will Provide

When you hire a bankruptcy attorney, you should expect certain services in exchange for your payment. Prime among them should be attentiveness and competence as it pertains to your case.

This means that your attorney should be able to give you reasonably sound advice on what your best legal moves would be. That includes if whether a filing is a smart choice, what to expect during the process, and how to approach bankruptcy in a way that would be most advantageous to you.

They should be able to point out any possible risks or big difficulties.

A bankruptcy attorney will also be able to take care of a great deal of paperwork that comes with the process. Not only will these attorneys understand the ins and outs of this paperwork, but many have software that can greatly simplify the process of filling it all out.

You will have to provide a good deal of information to an attorney, including your income, expense, and debt details. But they will be in charge of using this information to complete your application.

Your lawyer will also take the time to represent you at the various hearings that make up the bankruptcy process. There is a mandatory hearing for all that apply for bankruptcy, but there may be others as well depending on your situation. Your attorney can advise you on how many hearings you should expect for your particular case.

Chapter and Chapter 13 Bankruptcy Filings

One of the best things an attorney can do is help you decide what kind of bankruptcy to file for. They can help you compare and decide between Chapter 7 and Chapter 13 filing options. They will do this by examining the size of your debt, the assets you are willing to lose, and your ability to produce future income.

Once you’ve landed on a specific plan, an attorney can help work you through the best possible options for your case. If you go with Chapter 7, an attorney can help you protect your assets and ensure you don’t lose anything deeply important to you.

If you go the Chapter 13 route, an attorney can help to produce a payment plan that works for both you and your creditors. They can help you land on monthly payments that won’t break the bank that will allow you to get back on track with your life.

Depending on which route you go with, you might also consider how your bankruptcy filing will affect other areas of your life. Your business, your collaborators, and even your spouse might all be affected by this decision. An attorney, like those from this law firm, can walk you through these potential impacts. They can help you navigate the complicated web of legal requirements.

What to Expect From a Bankruptcy Attorney

Running to the end of your rope can be a terrible position to be in. But working with a bankruptcy attorney can mean a lot during this very difficult period of your life. They can help you handle the long road you have ahead of you.

Have more questions about the process? Check out our bankruptcy page for more.

6 months ago Bankruptcy Law

When Is It Highly Justifiable to File for Bankruptcy

When you find yourself either partially or fully unable to pay your outstanding debts, then bankruptcy law allows you get a NYC bankruptcy lawyer and rid yourself of those debts and give yourself a fresh start. You can find all the statutes constituting federal bankruptcy law in the United States Bankruptcy Code. There are also state laws on bankruptcy that cover areas not covered by federal law. As a debtor, you can file your case in federal bankruptcy court.

The Different Types of Bankruptcy

BankruptcyThere are six different types of bankruptcy in the U.S. Bankruptcy Code. They all provide you with permanent relief from specific debts, although they differ from each other in their form and also the procedures involved. Most of them can be categorized as chapter 7, chapter 11, or chapter 13 bankruptcies:

  • Chapter 7: This type provides for certain assets like a car or home, also known as nonexempt assets. Chapter 7 bankruptcy makes it possible to liquidate them and distribute the proceeds to creditors.
  • Chapter 9: This type provides for municipalities to be reorganized.
  • Chapter 11: This type is mostly used by corporations and partnerships and provides for the reorganization of the business under supervision. The debtor is also allowed to keep their business as they implement a payment plan. 
  • Chapter 12: This type provides for anglers and family farmers.
  • Chapter 13: This type provides for the bankruptcy of an individual with a regular income. The income can be used to formulate a 3–to-5-year payment plan.
  • Chapter 15: This type provides for bankruptcies across borders. It implements the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.

Is It justifiable to File for Bankruptcy?

BankruptcyBankruptcy comes with its downsides, such as the adverse effect it has on your credit. You should, therefore, only use it as a last resort. Some people resort to bankruptcy because they want to put an end to creditor harassment. However, most of this harassment is due to minor debts and creditors will never sue for those debts as the legal costs are too expensive. Also, you have the Fair Debt Collections Practices Act on your side if you want to put an end to the harassment. Some state laws enable you to get collection agencies and creditors to stop harassing you. 

However, there are scenarios where it makes plenty of sense to file for bankruptcy. These include a creditor threatening to repossess property that you find important, multiple wage garnishments and the need to delay a foreclosure.

How to Stop Creditor Repossession

BankruptcyWhen you file for bankruptcy, you trigger an automatic injunction on such things as collection efforts, lawsuits, wage garnishment and foreclosures. If you want to stop the creditors from repossessing your car or home and believe that your income can pay off your debts and still allow you to keep your property, you should consult a lawyer about filing for Chapter 13 bankruptcy

If you think you might have large expenses in the future, it might be a better idea to postpone filing for bankruptcy. You can’t file for bankruptcy as often as you like since the law limits this. A Chapter 7 bankruptcy will cancel the debt you have incurred by the time you file while Chapter 13 bankruptcy may not always consider expenses in the future. Because you can only discharge debts filed, it might be a good idea to wait for substantial expenses to fall due and then include them in your paperwork to get the largest possible discharge. 

Bankruptcy law is complex in general, and it is always a good idea to get yourself a bankruptcy lawyer to help you deal with your specific circumstances.

8 months ago Bankruptcy Law

Quick Guide to Navigating the Bankruptcy Code [2019]

Whether you are contemplating filing bankruptcy yourself, or know someone who is considering that option, this concise rundown will help you understand the different options within the bankruptcy code and empower you, or your friend or family member make the most informed decision to achieve financial security. If you are contemplating bankruptcy for yourself, contact an experienced bankruptcy attorney and schedule a free consultation so that you can discuss your options.

One Code, Coast to Coast

As established by the United States Constitution, the power to set bankruptcy laws rests exclusively with Congress. As a result, there is one national bankruptcy code that applies in all 50 states. 

A lot of what the general public knows about bankruptcy comes from consumer debt and common remedies, like filing Chapter 7, when someone can’t pay their bills or is about to lose their house. This term, as well as Chapter 13 and Chapter 11, describes the most common options available in the bankruptcy code.

The bankruptcy code is a lot more robust than most people realize. In its modern form, bankruptcy is designed to protect both debtors and creditors. Bankruptcy can be filed by individuals or couples whose personal finances are in a downward spiral. It can also be filed by business corporations, charities, and even public institutions and government entities that are unable to meet their financial obligations.

Chapter 7: Asset Liquidation

Chapter 7 is the most frequently sought bankruptcy protection, both by individuals and by corporations. This kind of bankruptcy is described as asset liquidation. An estate is created, and a neutral trustee is appointed to oversee the sale and distribution of a debtor’s non-exempt assets. 

To qualify for Chapter 7 bankruptcy, one must pass the means test which calculates whether the debtor earns too much to qualify to file Chapter 7. If a debtor’s income is above the median for their state and family size, there are some special circumstances where Chapter 7 can still apply, or they may choose to file for Chapter 13 bankruptcy and partially repay their unsecured debt.

Disabled soldiers, sailors, marines, and airmen can file for Chapter 7 even if their disposable income is well above the media. There are only two conditions for this special relief: the veteran must be at least 30% disabled from a service-connected injury, and more than half of their debt must have been incurred while they were on active duty.

Chapter 11: Restructuring Debt 

Chapter 11 is designed for businesses and high-income individuals who need bankruptcy protection. This bankruptcy chapter is tailored to complex financial holdings, such as multiple mortgaged properties or a publicly-traded company with extensive obligations to creditors, bond-holders, and shareholders  

For companies, filing Chapter 11 allows them to continue operating and attempt a corporate restructuring to save the business. Even if this plan fails, the shareholders and creditors usually receive more out of a confirmed Chapter 11 plan than they would if the company simply ceased operations and liquidated its assets. And many companies have been able, through belt-tightening and restructuring, to survive Chapter 11 and emerge as profitable and stable, a win for the company and its creditors.

Chapter 11 cases by private citizens only constitute a small percentage of all bankruptcies filed. When private filers seek Chapter 11 protection, it usually represents an attempt to renegotiate the mortgages on multiple properties, or a single, extremely valuable property whose worth exceeds the upper limits of a Chapter 13 filing. Chapter 11 cases require all creditors to confirm an equitable restructuring. Many lenders are willing to agree to renegotiate the balance of a property loan into a 30-year mortgage if it means the debtor won’t default. This is especially true in a weak housing market.

Chapter 13: A Partial Payment Plan

Chapter 13 bankruptcies are the second most common form of bankruptcy relief in the United States. Chapter 13 is not a liquidation action, but rather a partial repayment plan. It is most commonly used by individuals with a steady income who need time to cure arrears in a mortgage or car loan. 

To qualify for this Chapter 13 you must have enough income to continue paying your priority debts (such as taxes and child support) and for any secured assets you wish to keep (like a car or a house). You must also have enough income to meet basic support obligations, like food, medical insurance, and childcare. Any remaining disposable income is used to pay your monthly Chapter 13 plan payment to the Trustee. This will cure arrears and partially pay your unsecured debt.

If you successfully make all plan payments for a period of 36 to 60 months, your outstanding debts will be discharged and you will come current with your car loan or mortgage.

Rare and Obscure Forms of Bankruptcy: Chapters 9, 12, and 15

Chapter 9: When Towns and Schools Go Bankrupt

Chapter 9 is an incredibly obscure part of the bankruptcy code. The modern American bankruptcy codes were first enacted in the 1890s. Since then, this chapter has mainly been a hypothetical, and in most states, no municipality has ever tried to request protection under the statute.

When cities have attempted to file bankruptcy, their cases have become national scandals, mired in allegations of mismanagement and betrayal of city employees whose pensions and benefits are at risk in such an action. Detroit’s 2013 filing was one of the most dramatic bankruptcies in modern history; Detroit’s art museum was nearly forced to liquidate its priceless collection, and retired city employees had to accept pension cuts and cost-of-living freezes. 

Chapter 12 – Family Farmers and Fishermen

Yes, farmers and fishermen have their own chapter of the bankruptcy code. Under the Bankruptcy Code, family farmers or fishermen are individuals who earn more than half of their annual gross income from farming or commercial fishing. 

A Chapter 12 bankruptcy is similar to a Chapter 11 restructuring. It simply offers more protections to boats, farm equipment, and farmland so that family-owned farms and fishing boats can continue to operate during their bankruptcy. These protections are available to family farms only, not commercial operations, and the debt in question has to come from the operation of the farm or fishing boat.

Chapter 15 – International companies

This section of the bankruptcy code touches on international law. When a foreign company seeks bankruptcy protection, tradition and international law (specifically, the  United Nations Commission on International Trade Law’s Model Law of Cross-Border Insolvency) allow it to seek bankruptcy protection in any other nation where they have business assets. Chapter 15 regulates these requests. 

Chapter 15 was recently invoked by Alitalia, Italy’s flag carrier. While the Italian government approved a massive bailout for the airline, it was at risk of losing its lease on a terminal at JFK International Airport. By filing under Chapter 15, the airline was able to keep operating flights from New York until the bailout was complete.

Tackling the Bankruptcy Code 

You now have a basic understanding of what bankruptcy options are available and how they are implemented. With this new knowledge, you can more confidently navigate the process, or help another to do so. Remember to contact an attorney for a free consultation – especially now after you have learned a bit about how bankruptcy works.

Veronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area.

8 months ago Bankruptcy Law

Bankruptcy 101: What Are the Pros and Cons of Filing Bankruptcy?

Recent reports have suggested that as many as 20 million Americans could benefit from filing for bankruptcy. But despite this, only about 500,000 people do it every year.

Are you thinking about filing for bankruptcy right now? Before you do it, you should consider the pros and cons of filing bankruptcy to see if it’s really right for you.

Let’s take a closer look at some of these pros and cons to find out if bankruptcy would be the best option for you based on your current financial situation.

Pro: Gets Creditors Off Your Case Almost Immediately

Do you have creditors calling you almost every day and sending you letters in an effort to collect on a debt that you owe? This can take a huge toll on you and make it difficult for you to go about your normal business.

Once you find out how to file bankruptcy, this won’t be an issue anymore. You’ll notice that the collection calls will stop almost right away once you’ve filed for bankruptcy. This is because most, if not all, of your debts will be discharged once you file.

This can give you some sense of hope for the future. It can also eliminate a lot of the stress you feel at the moment as a result of your financial issues.

Con: Doesn’t Cover Every Kind of Debt

Some people are under the impression that bankruptcy will wipe away all of their debt. But there are certain types of debt that will stick around even after you file for bankruptcy.

Some of the debt that will linger includes:

  • Debts owed to the IRS
  • Student loan debts
  • Mortgage-related debts

A good bankruptcy lawyer can break down which types of debt will stick around after you file bankruptcy and advise you on whether or not bankruptcy would make sense for you.

Pro: Allows You to Rebuild Your Credit Over Time

If you’re able to discharge some of the debts you owe, it’ll put you in a better position to rebuild your credit over the years. You can put yourself back on the right track by eliminating debts that will be impossible to conquer.

Although bankruptcy will knock your credit score way down, there’s a good chance that your debt has already done a number on it. By knocking it down a little further and getting rid of debt at the same time, you can start the rebuilding process.

Con: Makes It Difficult to Get Loans in the Short Term

Bankruptcy will stay on your credit report for anywhere from 7 to 10 years. That means that, for the next decade or so, it’s going to be very hard to get a mortgage, a car loan, or even a credit card.

Of all the pros and cons of filing bankruptcy, this is probably the one you should spend the most time thinking about. You need to be mentally prepared to live without credit for up to a decade once your bankruptcy goes through.

Weigh the Pros and Cons of Filing Bankruptcy Before Making a Decision

Does bankruptcy sound like it might be a good move for you?

As long as you’ve weighed the pros and cons of filing bankruptcy, you should pursue it further. Talk to a lawyer about the process of filing for bankruptcy and all that it entails.

Read our blog for tips on finding the right lawyer to help you along the way with bankruptcy.

8 months ago Bankruptcy Law

Banks Can Freeze Your Accounts in Bankruptcy

Normally, when someone files for Chapter 7, all of the funds left in their personal accounts can be protected by bankruptcy exemptions. This is a function of bankruptcy protection, which is meant to equitably satisfy creditors without taking the shirt of a debtor’s back. There is just one loophole to this protection: the right of offset.

Many people are under the mistaken impression that once they file bankruptcy, their assets are completely safe from further collection efforts. Bankruptcy protections do include a stay of further collections. This protection has the power of a court order. It can prevent repossession of a vehicle, take a home scheduled for sheriff’s sale off the auction block, or even freeze a divorce proceeding. There is one entity that the stay of collections can’t block: banks.

Chapter 5 Bankruptcy

Under Chapter 5 of the Federal Bankruptcy Code, banks and other lenders have a right of offset–that means they can freeze assets sufficient to satisfy any outstanding debts to that institution by the holder of the account. People who try to file bankruptcy on their own often fall into this trap and lose access to their funds shortly after filing, but no bankruptcy lawyer would allow his client to make this mistake.

There is a simple way to avoid the issue of offset: create a checking account at an institution to which you don’t owe money, and transfer what’s left in your checking account there. As long as this account is included in your bankruptcy estate, there is nothing fraudulent about such a transfer.

Money frozen under the right of offset is unlikely to be unfrozen in any reasonable amount of time. If your bankruptcy was planned poorly, or if you tried to file bankruptcy without the help of an attorney, this can leave you with no access to any of your bank accounts. 

Under offset, banks can freeze some or all of your assets in their institution. Most banks will only freeze funds up to the value you owe Some banks will freeze more, and Wells Fargo (formerly Wachovia) has a policy of freezing all assets of a bankrupt customer until the bankruptcy trustee takes control of the funds.

Offset in Action

You Owe Money to the Bank that Holds Your Checking or Savings Accounts

Let’s look at the case of “John Smith”, a middle-aged man filing bankruptcy. John keeps his checking and savings accounts at PNC, with $1,000 between the two. 

John also has a personal loan through PNC for $3,000 that he thought would help him pay off his debt; instead, he has fallen behind on that payment too.

When you owe money to a bank at the time your bankruptcy is filed, they can treat the debt as a lien against their client’s checking or savings account. They can apply the frozen money to whatever fines, fees, or debts you owe them. This right is an exception to both your automatic stay and your federal exemptions. Even if John claimed that money in his bankruptcy filing under a wildcard exemption, the bank’s lien has priority; he is unlikely to see that money again.

If PNC asserts their right of offset, they could freeze all of John’s remaining money to protect their interest in his loan.  However, if John had more money in his accounts than he owed to the bank, they would only freeze his funds up to his liability with the bank. Say the situation was reversed; John had $3,000 total at PNC but owed the bank $1,000. They would freeze $1,000, leaving John without 2/3rd of his remaining assets. 

To prevent losing money to the right of offset, you should transfer funds out of any bank to which you owe a debt before filing bankruptcy. You should also cancel any direct deposit you have set up, such as work or school reimbursement, or risk losing it to the bank.

You’re an Authorized User on Another Account

By filing bankruptcy, you can cause other people’s accounts to be frozen. This happens when you are an authorized user on another person’s account and owe money to their bank. Even if you have never deposited into that account, banks might freeze any accounts you are authorized on as a precautionary measure. They will wait for the trustee to decide who’s money is who’s and if they are entitled to claim any funds in the account under the right of offset.

If you ever deposited funds into that account, the situation could get even uglier. The bank will likely claim the right of offset and attempt to freeze what you owe from that authorized account. Sorting that kind of situation with your bank and trustee could become a lengthy and expensive process. In the meanwhile, someone who trusted you enough to give you access to their bank account now has no access to their money and might be struggling to pay their mortgage or certain medical bills.

The Sign of the Stagecoach

If you bank with Wells Fargo, your accounts will be frozen after filing bankruptcy. It’s a corporate policy. You don’t have to owe a single dime to Wells Fargo. Their official corporate position is that they have a legal duty to protect the assets until a bankruptcy trustee can decide what belongs to who. It’s an unusual reading of the laws, and Wells Fargo is the only American bank to assert a perceived “duty” to freeze the accounts of clients who file for bankruptcy. They call it an administrative freeze. 

Citizens bank originally used this tactic in the 1990s as a way to force bankrupt clients to pay as much of their debt to the bank as possible. In a case which eventually landed before the Supreme Court, Citizens Bank argued that the right of offset entitled them to $3,500 from the accounts of a man who had fallen behind on a $5,000 loan. He initially argued that the funds were protected under the rules of the automatic stay; Citizens retorted that they were not collecting the money (yet), just placing it in administrative hold until the bankruptcy concluded and they could claim the right of offset. Thus it was not a collection action, and not prohibited under the law. The Supreme Court agreed.

Wells Fargo uses this reasoning and takes it even further; if the bank can administratively freeze a portion of an account without invoking the right of offset, they can freeze the entire account until the trustee decides who has a right to the funds. At a purely legal level, this does make it easier for bankruptcy trustees and eliminates the possibility of fraud. On a practical level, Wells Fargo is just punishing customers for filing, as the vast majority of people seeking Chapter 7 do not have funds exceeding the federal bankruptcy exemptions.

Armed With Knowledge

You now have a decent grasp of how banks can seize your money during a bankruptcy proceeding. Talk to an experienced bankruptcy attorney to devise the best defense against the banks that are holding your savings.

Veronica Baxter is a legal assistant and freelance writer located in Southern New Jersey.

8 months ago Bankruptcy Law

Filing for Bankruptcy in Court

It is important that while you are on the verge of falling bankrupt, you also know what kind of filing you are dealing inside the courts, as to how your bankruptcy lawyers (in Ontario CA/ ) dwell on the matter in the court.

According to Stroock & Stroock & Lavan LLP (2010), in their Stroock: A Guide to Bankruptcy Law in the United States, there is this part in bankruptcy filing wherein debtors or applicants must identify the type of filing they are giving the courts, and there are two (2) types: 

1. Voluntary Filing

 According to the abovementioned authors, “A voluntary bankruptcy case is commenced when the debtor files a petition under the particular Chapter of the Bankruptcy Code under which it wishes to proceed. The filing of the petition bring about the stay that is automatic (and constitutes the order for relief under the Chapter under which the petition is filed(11 U.S.C. §§ 301, 362(a)).The entry of such order for relief, however, is not a binding determination of either a debtor’s eligibility to be a debtor under the Bankruptcy Code or any other substantive matter.”

2. Involuntary Filing

 For the second type of bankruptcy filing in the court, it is the Bankruptcy Case that is involuntary, which according to Stroock,, “may be commenced only under Chapter 11 or 7 and only against a person that is eligible to be a borrower covered by the selected Chapter, unless the person is a farmer or a corporation that is not a business or commercial corporation. If a borrower has more than twelve creditors, an involuntary case begins  by filing a petition by more than three bodies holding undisputed and non-contingent allegation against the debtor, provided that such claims agglomerate $14,425 which is higher than the value of any lienor property of the borrower that secures such claims. If a borrower has less than twelve creditors which excludes employees, however, the petition that is not voluntary  can be brought by more than one body holding undisputed and non-contingent allegations contrary the debtor as long as such claims agglomerate $14,425 higher than the cost of the collateral. (11 U.S.C. § 303(b). The automatic stay can be triggered by the filling of a petition that is involuntary (discussed below in Chapter V.C.).11 U.S.C. § 362(a).”

Finally, we recommend that you check out the book made by the author mentioned in  order to extract the full details with regard Bankruptcy cases. Additionally, it is a must for any client with similar concerns as in this article to be assisted by an expert and effective lawyer from your place, or just like the LG Law Firm that has records of wins in bankruptcy cases. At the very least, this article only aims to give you a glimpse of how bankruptcy procedural cases works, for basic educational purposes.

8 months ago Bankruptcy Law

A Multitude of Losses: Is this what Bankruptcy offers us?

“Bankruptcy is synonymous to financial losses…and that is a fact!” A very disdaining thought that many people perceive about the term bankruptcy, unless given the right supplemental thought that ‘Filing for Bankruptcy’ only with additional two pre-words, makes the concept a whole lot positive than the former one. Does bankruptcy or filing for one, results to one’s losses? In this article, we would like to present the different types of bankruptcy, and finally, give the general thought of every kind to the one filing it.

According to the book with the title, The Bankruptcy Book: The Truth About Ending Your Bill Problems And Getting Back The Good Credit You Deserve, written by Christopher McAvoy in 2010, he highlighted the types of bankruptcy commonly used in the United States, they are the following:

  • Chapter 7, also known as straight bankruptcy. This is the fastest, easiest, and least expensive kind of bankruptcy.
  • Chapter 11 reorganization is used primarily by businesses but also by people with substantial debts and assets.
  • Chapter 12, which is used solely by family farmers as a way to reorganize their finances.
  • Chapter 13 is the personal version of Chapter 11. Individuals with a regular source of income can put together a payment plan in exchange for keeping all of their property. It’s used heavily by people who are looking to save a home from foreclosure or a car from repossession.

Plus two (2) types of reorganization bankruptcy:

 Chapter 11 bankruptcy can be filed by businesses who are struggling financially to restructure their affairs. It is also applicable to individuals. However, Chapter 11 bankruptcy is costly and it consumes so much time, it is commonly filed only by those people or businesses whose credit exceeds the limitation of Chapter 13 bankruptcy or who own considerable assets that are non-exempt such as some real estate properties. If you are considering Chapter 11 bankruptcy, you will need an assistance of a lawyer.

 Chapter 12 bankruptcy  is almost the same with Chapter 13 bankruptcy. But the difference is that, to be qualified  for Chapter 12 bankruptcy, it should be minimum of 80% of your debts must appear from the operation of a farm owned by a family. Chapter 12 bankruptcy has higher debt margin to cater the extensive debts that may come with farm operation, and it offers the borrower more control to terminate several types of charges. Only few people use Chapter 12 bankruptcy; you will need an assistance of a lawyer to file Chapter 12 bankruptcy..”

 If you have read the claims of Mr. McAvoy, you will notice that these types of bankruptcy have commonality, that is, to solve one’s financial dilemma or debts, and lessen the burden on the debtor/in-debted person.

 Now, do you still believe that bankruptcy causes a multitude of losses? It is all about the mind-setting that one must impose in him/herself, for a better result/s. Nevertheless, one must also be assisted by a great mentor or bankruptcy lawyer such as the KT Bankruptcy Lawyer which caters the Best Bankruptcy Attorney in Irvine, or other law firms that has records of winnings in bankruptcy cases.

10 months ago Bankruptcy Law

What to Know When Filing for Bankruptcy

No matter how prepared you may think you are, bankruptcy can still impact your business, family, and personal life. While it is a stressful and intimidating procedure to go through, it is better to look at it as a necessary step towards moving on from financial trouble. It’s will protect you in the long run. 

If you have found yourself faced with a possible bankruptcy and are looking for some clear answers, here’s everything you need to know so you can move forward:

What to Know When Filing for BankruptcyHire a Lawyer

This is the most important tip we can provide you with and is one that we highly recommend you follow.

Handling a personal bankruptcy is incredibly stressful and nearly impossible to battle all alone. Despite the costs, bringing on legal help will ultimately give you a much better outcome than if you were to proceed alone.

During the bankruptcy process, your financial scenario is very vulnerable. When you hire a bankruptcy lawyer, you’re fostering a relationship with some that has experience dealing with your exact situation. They are prepared to commit to your unique situation and help you every step of the way.


Once you have hired on help, you need to establish who will be handling what. During the bankruptcy process, there are many loose ends that need to be tied up, and lucky for you, some law offices will take all matters into their own hands.

With that being said, ensure that you are part of the process and know how and when things are being completed. Don’t hand your legal matters over and then think you can kick back and relax. You want to make sure your finances are cared for.

Amount You Currently Owe

While the legal help you hire will be able to aid in this process, you will need to compile a definitive amount of what you owe and how far your debt extends.

When you are researching this amount, you must ensure to include all lines of credit that you have and the amount that has accumulated on each line. You must have documentation to prove these numbers and to use throughout the entire process.

Another tip regarding your lines of credit: We recommend that you contact each company that you are a part of to ensure that the credited amounts are correct and accounted for.

Additionally, some companies will offer a little leeway in certain circumstances. If you reach out to a credit company, and they see that you are faced with bankruptcy, there is a chance that they will offer forgiveness and excuse whatever amounts you may have owed.

While this happening is relatively rare, it is worth it to take the time and contact the companies from each line of credit under your name.

Length of Time

The biggest issue when facing a personal bankruptcy is understanding that it will impact you for years to come. Again, hiring on legal help early on is your best bet in having as smooth a process as possible.

When filing for bankruptcy, ensure that you know how long the report is going to affect your credit. It will likely be at least a few years before the bankruptcy can drop off of your name, so be prepared to take the time to rebuild your credit under different circumstances.

Additionally, bankruptcy will almost always impact your ability to go through with large purchases. Understand that buying a house, car, or any other large investment may prove to be incredibly difficult during this time.

It is not impossible to recover quickly, though it usually takes years to rebuild your credibility in the eyes of most banks and credit companies.

Overall, bankruptcies are not ideal. That being said, there are many circumstances in which they become necessary. If you find yourself facing bankruptcy, we highly recommend that you hire expert help to guide you through the process. You don’t have to go through this stressful and exhausting experience the right guidance.


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