Creditor Rights During Consumer Bankruptcy

If you are a creditor or lender, either secured or unsecured, affiliated or private, you have probably aware of the risks of pursuing a debt from a consumer. In the event that you inadvertently step over the line, even for a second and in the most minimal of ways, consumers are highly encouraged to throw a lawsuit at you for collections violations. Losing such a case would not only stop you from collecting on their loan but could also wind up with ­you paying them instead.

So what can you do if one of your consumer clients files for bankruptcy? Are you out of luck? Or are there steps you can take and rights you can fight to uphold as a creditor without getting into legal trouble?

What You Can Do As a Creditor During Client Bankruptcy

  1. Debt discharge denial: When someone goes into bankruptcy, the primary goal will be for them to discharge as much debt as they possibly can, including the money that they owe you for your loan. You will have a brief window of opportunity – usually around 60 days – after the bankruptcy is declared to file a petition to block your debt’s discharge. For the court to consider your petition as valid, you will usually need to prove that some unlawful or negligent actions on behalf of your client caused them to fail in their payments.
  2. Non-automatic stay: A consumer filing for bankruptcy will create an automatic stay on their accounts, or an injunction that prevents creditors from collecting on debts or attempting to do so. This is done without any legal action, thus the term automatic. Depending on when the bankruptcy filing occurred and what else was going on, such as a foreclosure or trial, you can ask the bankruptcy court to remove the automatic stay, at least for your own collection purposes.
  3. Chapter 13 dividends: If your client is filing for Chapter 13 and proposing a repayment plan for their debts, you have a right to review it. Depending on what you find in their repayment plan, you may be able to challenge it by proving that it is either entirely unrealistic for you to expect that you will eventually be repaid by the individual or drafted in bad faith, or with the intent for it to fail.

You can, of course, also team up with a trusted Fort Worth consumer collections attorney from The Pritchard Law Firm. With our 45+ years of combined experience, we can discuss your case in a free consultation to determine if you should file a lawsuit in defense of your interests. Call (817) 285-8017 for more information.

How Does the Process of Foreclosure Work?

If a borrower should ever default on a loan against their home such as a mortgage or a home equity loan, creditors may claim their home as payment through a process is known as foreclosure. In the state of Texas, the process of foreclosure lasts around 160 days and involves several steps. Our firm has detailed what happens from the first time a homeowner misses a payment to eviction.

1. Missed payment: Borrowers who miss payments are often given a 10 to 15 day grace period to make their payment before being assessed a late fee. This fee will often be five percent of both the principal and interest of the late payment.

2. Multiple missed payments: Borrowers who miss more than one payment in a row will likely receive a letter reminding them to catch up on their payments and attempt to collect. Debtors should not ignore these letters or phone calls as they can be provide a useful opportunity to negotiate an agreement and avoid foreclosure.

3. Breach letter: After a debtor has been more than 120 days delinquent on payments, lenders in Texas may send a breach or demand letter to the debtor informing them that their loan is in default and that judicial or nonjudicial foreclosure may be sought. Most foreclosures in the state of Texas are do not require a lender to go to court as long as the deed of trust has a “power of sale clause,” or a section that details the lender’s right to pursue nonjudicial foreclosure. This letter must include the borrower’s default, what is needed to cure the default, a date by which this default must be cured, and that failing to cure the default will result in acceleration of foreclosure.

4. Notice of Default and Intent to Accelerate: Under Texas law, lenders must send borrowers a notice of default and intent to accelerate. This notice must provide a minimum of 20 days to cure the default before pursuing seizure and sale of the property.

5. Notice of Sale: If the cure period expires and the borrower has not cured the default, the lender will inform the borrowers of their intent to sell the property. This notice will be sent to each borrower who is responsible for the debt and will include the date, time, and location of the sale. Notices of sale are filed with the county clerk in the county in which the property is located and are displayed on the door of the same county courthouse.

6. Foreclosure sale: The county courthouse holds foreclosure sales on the first Tuesday of every month from 10 am to 4 pm. These sales take an auction format and foreclosed properties are either sold to the highest bidder or reclaimed by the lender.

7. Deficiency judgments: If the sale price of the property is less than the total amount owed, a lender can file a lawsuit against the debtor in pursuit of a deficiency judgment to cover the difference. Debtors are granted a credit for the difference between the market value of the property and the sale price to be used towards covering this judgment.

8. Eviction: Borrowers must leave a property after it is sold or else eviction will be sought. While some lenders may offer to pay tenants a certain amount of money in exchange for their agreement to vacate the premises, others may choose to serve the tenants with a notice to leave within three days and file an eviction lawsuit. The courts will often grant this judgment and issue a writ of possession after five days have passed. The sheriff’s department will issue tenants a 24-hour warning to evict before forcibly removing them from the property.

Facing Foreclosure? Call (817) 285-8017

If you are behind on your mortgage or have already received a notice of foreclosure on your property, it is vital you contact a knowledgeable Fort Worth bankruptcy attorney from The Pritchard Law Firm as soon as possible to protect your rights. With more than 45 years of experience, we are intimately familiar with the process of foreclosure and can maximize your chances of being able to keep your home.

Contact our office online or request a free consultation today to get started.

Keeping Your Tax Return After Filing for Bankruptcy

The Internal Revenue Service (IRS) is pretty notorious all around the United States for trying to get their hands into everyone’s finances, but once a year they can actually give back, to some extent. By filing your tax return correctly, you could wind up collecting decent money from the IRS – just try to ignore the fact that they took so much more first. But what if you are losing an uphill financial battle and considering filing for bankruptcy around the same time you need to file your taxes? Will you be able to keep that tax refund?

Chapter 7, Chapter 13, and Your Tax Refund

From the get-go, there are some ways you can legally protect your tax refund from being collected during bankruptcy, namely using legal exemptions. This was recently covered in another one of our bankruptcy blog entries (Should I File Income Taxes Before or After Bankruptcy?) so be sure to give that one a read as well if you think exemptions will work for you. For these situations, let us assume you did not qualify for any exemptions. What can you do?

If you are filing for Chapter 13 bankruptcy, your creditors are more likely to be able to snag your tax refund. This is due to the fact that your Chapter 13 bankruptcy plan hinges on your agreement and obligation to do as much as you can to pay off your debt, or some of it, over the next few years. The tax return is considered disposable income since you didn’t know how much you were going to get back from them, if any at all, in the first place. Thus, it needs to go towards your bankruptcy estate.

If you are filing for Chapter 7 bankruptcy, the likelihood of you keeping your tax refund largely depends on the timing. If you get your tax return and file for Chapter 7 a month later, say goodbye to the refund; Chapter 7 involves giving up as much as you can and then dropping the rest of your debt and, once again, a tax refund is disposable income. If you file for Chapter 7 and then file your taxes a month or so later, the situation could be the complete opposite; you have already finalized your bankruptcy and the creditors don’t have power over you anymore, so whatever you get from the IRS is now yours to keep.

Do you have more questions you would like to get answered by a professional Fort Worth bankruptcy attorney? Bankruptcy and taxes are both complicated subjects alone, even more so together, so don’t feel frustrated if you still need some guidance. You can contact The Pritchard Law Firm for a complimentary initial case evaluation today.

Should I File Income Taxes Before or After Bankruptcy?

If you are considering filing for Chapter 7 bankruptcy, it is important you consider the effects that bankruptcy will have on your income taxes. Your ability to keep your refund will be affected by the amount of money in your refund, your exemptions, and when you file for bankruptcy.

Which Exemptions Should I Choose?

Upon filing for bankruptcy, nearly all of your assets will become part of the bankruptcy estate, including any tax refunds you have not yet received. Any tax returns that are not exempt are subject to being claimed by creditors. Therefore, the only way to protect your tax return is to exempt it in some form. People who file for bankruptcy in Texas are given the option to exempt certain property under either state or federal exemption standards. A person must choose one or the other and may not mix the two plans. An attorney can help you choose which exemption structure is right for you.

While Texas exemptions are generous and will often allow a person to keep their home and large amounts of property, tax returns are not covered under state exemptions. If you wish to protect your tax return, you can do so under the federal “wildcard” exemption up to $1,225 plus any unused portion of the federal homestead exemption, totaling up to $12,725. It is important to keep in mind, however, that choosing federal over state exemptions may not be wise if you have significant equity in your home or large amounts of personal property.

What if I Can’t Exempt My Refund?

If it is more advantageous for you to choose state exemptions, there are other ways of protecting your tax return. If you have the ability, simply wait until you have received and spent your tax return before filing for bankruptcy. If you spend your tax return on another asset, however, it will be subject to being claimed by creditors unless exempted. It is encouraged that you spend your tax return on living expenses prior to filing for bankruptcy, such as for food, gas, or car insurance.

Contact the Pritchard Law Firm Today

If you are struggling to make ends meet under the weight of crippling debt, a Fort Worth bankruptcy lawyer from The Pritchard Law Firm can examine your financial situation and guide you through the process of filing for bankruptcy. Having earned a 2015 Avvo Clients’ Choice Award for our outstanding advocacy, we can provide the knowledgeable guidance you need to help you get through this difficult time and on the road towards a debt-free future.

To find out more about what our 45+ years of experience can do for you, contact our office online or give us a call today at (817) 285-8017.

The Effects of Bankruptcy on Credit

One of the most common fears regarding bankruptcy is the effect that filing will have on a person’s credit score. When you file for bankruptcy, the three national credit reporting agencies, Equifax, TransUnion and Experian, are required to include your filing on your credit report for a period of 10 years. With that being said, this does not mean that you will have bad credit for 10 years. Your credit score can be greatly affected by your actions after you file, allowing you to improve your credit with responsible behavior.

Will Filing for Bankruptcy Ruin my Credit Score?

Not necessarily. If you had good credit before filing, your score will undoubtedly take a hit. This usually does not matter, as people who are considering filing for bankruptcy are often already in poor financial shape. If your credit score is already low, filing for bankruptcy will have a much smaller impact on your credit.

On the contrary, filing for bankruptcy can actually provide you with an opportunity to improve your credit score. Eliminating your unsecured debt through a Chapter 7 or Chapter 13 bankruptcy can allow you to get back on your feet and get your finances in order, making it much easier for you to make future debt payments in full and on time.

Do Chapter 7 and Chapter 13 Plans Have Different Effects?

Sometimes. While the nominal effect will be the same regardless of which plan you choose, some creditors will look more favorably on a Chapter 13 bankruptcy and see it as a sign of responsibility. This is because Chapter 13 involves establishing a repayment plan rather than discharging debt through liquidation, thereby making a person appear to be a better credit risk.

How Can I Improve My Credit After Bankruptcy?

One of the best ways to that you can restore your credit after filing for bankruptcy is through the responsible use of credit cards. Contrary to popular belief, getting a credit card after bankruptcy is relatively easy. A debt discharge from Chapter 7 bankruptcy can provide a reduction in your debt-to-income ratio, making you a less-risky lending option in the eyes of certain credit card companies.

While the credit limits of these cards will more than likely be low at first, consistently paying on time and in full every month can prompt lead to an increase in your credit limit and credit score over time. Good behavior can potentially be reflected in your credit score within two-to-four years after filing for bankruptcy.

Struggling with Debt? Call (817) 285-8017

At The Pritchard Law Firm, our skilled bankruptcy attorneys have helped countless clients in the Fort Worth area overcome their debt with our knowledgeable advocacy. If you are looking to file for bankruptcy, our firm can walk you through the process with ease and protect your interests every step of the way.

To get started, contact us online or request a free case evaluation today!

Three Common Myths About Bankruptcy

Bankruptcy can be a frightening concept at first glance. Due to its social stigma of being associated with failure and shame, many people have shied away from ever considering bankruptcy as a viable solution for their debt. This is simply not true! Bankruptcy is an honorable and completely legal option for financially struggling Americans to start fresh, providing much needed relief from harassing collection calls. To help clear up some confusion, our firm has put together a list of common bankruptcy myths.

1. “I Can Never Get a Credit Card Again”

Many people believe that they will never again be approved for a credit card once they have filed for bankruptcy. The reality is quite the opposite: many people receive credit card offers almost immediately after completing the bankruptcy process. While access to certain cards will be limited, you will certainly be able to get a low-limit credit card. Using a credit card after bankruptcy is vital to helping you rebuild your credit score and improve your options for future auto and home loans. With that being said, excessive credit card spending is the reason why many people find themselves in financial straits in the first place, making it imperative that you spend with caution.

2. “I Will Lose Everything”

Yet again, this one is false. During Chapter 7 bankruptcy only non-exempt property will be subject to being claimed by creditors. While the exact amount of property you will be able to keep will vary depending on your marital status, a surprising amount of your assets will be off-limits from creditors.

Texas offers generous exemptions during bankruptcy, allowing you to keep:

  • Your home
  • Your retirement assets
  • Your vehicle
  • Your equity in your home
  • Up to two firearms
  • Your clothing
  • Up to $100,000 of personal property

If you are filing for Chapter 13 bankruptcy, you will be able to keep nearly all of your assets. As opposed to the liquidation process of Chapter 7, Chapter 13 bankruptcy involves creating a three-to-five-year repayment plan. An experienced attorney can examine your situation and determine which option best fits your individual needs.

3. “Everyone Will Know I Have Filed”

Despite bankruptcy’s completely legal nature, many people feel ashamed of their filing and are fearful of having anyone find out about their struggles. The only people who will know you have filed for bankruptcy are your creditors, your lawyer, and anyone who you choose to tell. While bankruptcy is a matter of public record, the sheer amount of filings that occur make it so only those who are specifically interested in uncovering your past are likely to discover your filing. Unless you live a life in the public eye, your chances of having anyone find out about your bankruptcy filing are slim.

Contact The Pritchard Law Firm Today

If you are struggling with debt, a highly knowledgeable Fort Worth bankruptcy attorney from The Pritchard Law Firm can walk you through the process of filing for bankruptcy and guide you towards a financially sound future. With more than 45 years’ of combined experience, we can provide the skilled and compassionate representation you need to help you get through this difficult time.

To find out more about what our award-winning lawyers can do for you, call (817) 285-8017 to request a free consultation today!

Tax Refunds and Chapter 7 Bankruptcy

Tax season is right around the corner. For some of us, this means receiving a tax refund that is sure to provide some financial relief. For others, an air of uncertainty abounds as they prepare to file their taxes and file for Chapter 7 bankruptcy. If you are in this second group, you are undoubtedly wondering, “Will I be able to keep my tax refund despite my looming bankruptcy?” After all, Chapter 7 bankruptcy is all about paying off as much of your debt as possible and then dropping the rest. So will you be able to keep it when the dust settles? The answer is a certified maybe.

It boils down to the details, specifically to when you file for bankruptcy and when you receive your tax refund:

  • If you file for Chapter 7 and your last tax refund was a year ago, that money is more than likely going to wind up in your bankruptcy estate, or what creditors are allowed to get their hands on as your bankruptcy advances.
  • If you file for Chapter 7 the year of your tax refund, it could be split up between you and the bankruptcy estate. Money you earned before filing will go to creditors and money you earned after the date of filing – there is no such thing as an instant bankruptcy case – will go to you.
  • If you file for Chapter 7 and your next tax refund comes a year later, the entire refund should be yours to keep. Your successful bankruptcy should allow you to step away from your debt and start anew, and thus, there are no creditors left to take your refund.

Tax Planning and Bankruptcy Filing

You are the only person in control of when you file for bankruptcy and, in a way, when you file your taxes and receive a refund. If you plan ahead to coordinate your two separate filings, you can increase your chances of holding onto your tax refund.

Consider these options to keep as much for yourself as possible:

  1. Exempt: Based on the size of your estate and where you live, you may be able to keep a certain dollar sum exempt from creditor payments. If your estate is somewhat small and so is your tax refund, it can probably be considered outright exempt, regardless of when you file.
  2. Withholding adjustment: You do not need to get all of your tax refund in one lump sum. You can instead adjust the amount you wish to withhold and only pay what you owe at the time of filing. This can stagger your tax refund amount to future paychecks, allowing you to collect some or most of it after you file for bankruptcy.
  3. Expenditures: Even the meanest-looking Chapter 7 bankruptcies should not strip you of your right to necessary expenditures. If you get your tax refund but still need to file for bankruptcy in the near future, spend it! Reminder: you need to spend it on necessary things, such as mortgages, rent, utilities, food and clothing, and medical care. Do not go out and buy a new television, for example. Not only will that likely be snatched up by creditors but it could flag you for fraud.

Preparing your taxes or a bankruptcy filing can be hard work all on its own. When the two combine or come up around the same time, the stress may feel multiplicative or exponential. Let our Fort Worth bankruptcy attorneys from The Pritchard Law Firm take that load off your shoulders by retaining our professional services that are backed by 45+ years of collective experience and happy client testimonials. Why not contact us today for information about your case? We offer complimentary initial case evaluations so you have nothing to risk but much to gain.

What You Need to Know When Considering Bankruptcy

Bankruptcy is commonly built up by society and the media to be this huge, hulking, and frightful financial disaster that leaves people penniless and helpless. But you have to consider: if it really was that bad, why would anyone go through with it? The truth is that bankruptcy, when used properly, can be a saving grace from fiscal woes. If you are considering bankruptcy, there are a few things you really should know before you get too far into the process.

  1. Asset protection: Once again contrary to popular belief, you can hold onto some of your most important assets during a bankruptcy. Your ability to do so will depend on your kind of debt and what you own. A bankruptcy attorney can tell you if there are ways for you to protect them upfront.
  2. Medical troubles: It is estimated that at least 50% of all bankruptcy filings by individuals are done due to unexpected medical expenses. If you are watching your finances drain due to a medical emergency, considering bankruptcy could be the right move for you.
  3. Multiple choices: Did you know there are multiple forms of bankruptcy? Most people will be faced with at least two options – Chapter 7 or Chapter 13 – but there are others. Chapter 7 will attempt to wipe out all debt in one blow while Chapter 13 formulates a repayment plan over three to five years.
  4. Qualification: Just because you want to eliminate your debt completely through Chapter 7 bankruptcy doesn’t mean you will be permitted to do so. You must actually qualify for Chapter 7 through a means test drafted according to the average income of people in your state.
  5. Credit score: A bankruptcy is going to appear on your credit, usually for about 10 years. What it does once it is there is not predetermined. Creditors may be hesitant to give you loans, or no change in particular could happen. Don’t assume your credit will be destroyed forever and run from bankruptcy on an assumption.
  6. Joint pain: If you do successfully file for bankruptcy, creditors cannot pursue you anymore for debts. However, if the debt was on a joint account, anyone else on the account who has not also filed for bankruptcy will absorb your debt and be responsible for it. Always work with other relevant parties when considering bankruptcy.
  7. Public eyes: Keep in mind that your bankruptcy is not private by default. It goes on public record. As nearly everyone else in the world will not take the time to look up names of people who have recently filed for divorce, this should not deter you from filing if necessary. There is no shame in seeking financial stability.

Considering Bankruptcy? Consider The Pritchard Law Firm

When you are considering filing for bankruptcy, you are sure to run into a mass of questions about your finances, your future, and your stability. Thankfully, you do not have to search far and wide for the answers. Our Fort Worth bankruptcy lawyers can answer all of them for you in a friendly and timely manner, and we have nearly 50 years of collective experience so you know you can trust us. Start today by calling to schedule a FREE initial consultation with our team.