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.

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.

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!

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.