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June 2010 Archives

Chapter 7 Bankruptcy

Chapter 7 is typically the Chapter we recommend if our clients are eligible.  It is very quick, it is very beneficial for the client, and we feel it is the fastest way to help our clients get back on track with their credit score.

Chapter 7 is called a "liquidation bankruptcy."  However, almost none of our clients who file Chapter 7 lose any of their assets they wish to keep.  We visit with our clients, review their assets with them and advise how we can claim them as exempt.

In Chapter 7, you can retain your interest in your home, your cars for each driver in the family, your personal property in your home, and discharge your unsecured debts (credit card & medical bills).

Over 70% of the cases we filed in the first quarter of 2010 were Chapter 7 cases.  Most people in Collin County and the surrounding counties fail the first part of the Means Test.  However, most of those same people pass the second part of the Means Test and are able to file Chapter 7.

Chapter 13 Bankruptcy

Why would someone file a Chapter 13 Bankruptcy?

There are a number of reasons.  First, if you are behind on your mortgage payment, then a Chapter 13 can help you get current.  A "Chapter 13 Plan" is just like a 5 year note to get you caught up on your notes on the assets that you want to keep.  This "Plan" is just like a 60 month note.

If you have a $2,000 a month house payment and you are 3 months behind on your house, the mortgage company is obviously going to want you to pay them $6,000 to get caught up or they are going to foreclose on the property.  Well, you may not have $6,000 in your pocket since you are going through financial problems.  If you don't want to lose your house, then you need to file a Chapter 13.  That way, you can make your normal monthly payments plus pay back that $6,000 over 60 months (about $100 a month).

Another reason you might file a 13 is because you are facing repossession of a vehicle.  Chapter 13 can prevent that.  

Also, if you have a large IRS obligation then the penalties and interest the IRS is charging you will cease upon the filing of the Chapter 13 Plan and you can pay your taxes back at 0%.

The overwhelming majority of our Chapter 13 clients pay back nothing to the unsecured creditors!

Why is my credit card debt not being reduced?

You pay your credit card bills every month, so why in the world is the balance not going down?

The interest rate.

Let's take "Bill" as an example.  Bill has 4 credit cards.  He owes them a combined total of $30,000.  Bill pays them $700 a month almost religiously.  Well, he went to visit his mother in Kansas because she was having a couple of problems.  When he got back to his place in Plano, he had to catch up on some overdue projects at work.  Then Bill's dog had to get to the vet, and he had to get to the grocery store to restock the fridge from being in Kansas for a week.  The tires needed replacing, and he just could not get around to paying the bills that were stacking up on the kitchen cabinet since he took off for Kansas until the end of the week.

Bill was exhausted, but he sat down and started writing checks to send off to pay his various monthly expenses.  He was disgusted because he realized the due date for his American Express minimum payment was the day before.

A month goes by, and he was further disgusted because since he was 1 day late on that one  credit card, suddenly all of his credit cards jacked his interest rate up to an average of 25%.

Bill's minimum payments were $700 a month, and that is all he could really afford in addition to keeping up with his mortgage payment, utilities, eating, etc.  

Nutshell:  At 25% interest, that $30,000 in credit card debt cost Bill $625 a month in interest.  Bill sent his hard earned $700 a month in to the credit cards, and that $30,000 was reduced by a grand total of $75 a month.

Bill needs to seek the advice of an experienced bankruptcy attorney or Bill will never retire...ever.

Aggravated Assault with a Deadly Weapon

Typically, this charge in Texas is indicted as a 2nd Degree Felony.  However, it can be enhanced to a 1st Degree Felony under certain circumstances.  Reasons for enhancement include, but are not limited to:  bias, prejudice, prior convictions, prior juvenile commitment to Texas Youth Commission, a complainant who is considered a "Family Member" under the Family Code, and offenses in a "drug free" or a "gun free" zone.

An offense where the state alleges the use or exhibition of a deadly weapon during the commission of the crime is an extremely dangerous charge because it is referred to as a "3G" offense.  The Penal Code statutorily prohibits the judge from sentencing an offender convicted of a "3G" offense to probation after a conviction at trial.

In other words, if you are convicted at trial and you have not timely filed the appropriate paperwork, then you are going to prison for a minimum of 2-20 years.  

Texas Code of Criminal Procedure Sec. 3G states that if there is an affirmative finding under subsection (a)(2) in the trial of a felony of the second degree or higher that the deadly weapon used or exhibited as a firearm and the defendant is granted community supervision by the jury, the court may order the defendant confined in the institutional division of the Texas Department of Criminal Justice for not less that 60 and not more than 120 days.  

Aggravated Assault cases are serious.  If you are charged with an allegation like this, you need an experienced criminal lawyer at Pelley Law Office, L.L.P. to help you.

Family Violence Conviction Consequences

Much like Capital Murder and DWI law, family violence has developed its own body of law over the years.  For example, the Family Code has expanded its definition of what constitutes "domestic violence" or "family violence" to persons who are not "related" in the traditional sense.  A person is a member of a family if they are related by consanguinity (blood) or affinity, if they are former spouses of each other, if they are the parents of the same child, without regard to marriage or if they are a foster child or foster parent without regard to whether they reside together.  If also includes persons who are dating, and those who have previously lived in a household.

Under Texas divorce law, a person is generally not entitled to spousal maintenance unless they have been married for at least ten (10) years.  However, section 8.051 of the Family Code provides for spousal maintenance to a spouse who has been the victim of family violence, regardless of how long the couple was married.  For purposes of that statute, deferred adjudication is as good as a conviction.

If a person has a "history of domestic violence," the court hearing any Suit Affecting Parent-Child Relationship must deny the offender access to the child under the Family Code.  In addition to the denial of  access, the Court may consider any evidence of abuse occurring within two (2) years of filing for divorce when determining  whether to appoint managing conservators.  If there is credible evidence that family violence has occurred during this time period, the court may not appoint joint managing conservators. 

Can I discharge IRS debt?

Sometimes, but generally not. It has been our experience that problems arise unless you deal with the IRS from the outset.  If you file a Chapter 13 bankruptcy, then any non-dischargeable IRS debt can be paid back through the bankruptcy Plan at 0% interest.  That will save you a tremendous amount of money if you owe the IRS more than $10,000.  

If your tax returns have been on file for more than three (3) years and your case happens to fall within the exception to the general rule that taxes are not dischargeable, then it is important to specifically notify the IRS that the taxes have been discharged.  Otherwise, in a Chapter 7 bankruptcy the IRS typically takes the position that they are never discharged.

As such, it is often necessary to file an Adversarial Proceeding in Chapter 7 and obtain a Federal Court Order against the IRS advising them that they have been discharged.  An Adversary Proceeding is like filing a separate lawsuit against the IRS.  When our eligible clients do not obtain such a specific Order from the Federal Bankruptcy Judge, we have found it common for the IRS to continue to try to levy on their accounts and/or to withhold tax refunds to which they would otherwise be entitled.

Dangerous Debt Settlement Companies

I heard an advertisement on the radio the other day for a debt settlement company.  The voice stated something to the effect of: We know you don't want to file bankruptcy...and the company proposed the public to consider their debt settlement plan.

What the advertisement did not mention is the fact that in the IRS' Internal Revenue Code there is a statute that states that forgiveness of debt is includible in your Gross Income.  In English, that means there is a law that says if you settle with your creditors, you are taxed on the portion of the debt that is forgiven!

That means that even if you do a debt settlement plan, you may well be forced to later file bankruptcy due to IRS debt.

Debt settlement or debt consolidation companies are rarely the best solution. 

Credit Rehab

One of the things that we will discuss at the free initial consultation is the rehabilitation of your credit after you file the bankruptcy.  Proper utilization of the Bankruptcy Code will typically enable you to rehabilitate your credit score very quickly.  A good credit score is critically important when you are applying for a new loan.

It sounds counterintuitive, but once you receive your discharge from the Bankruptcy Court, you will have a much better debt to income ratio which should significantly improve your credit score.

If you can remain current on your mortgage payments and car payments, then that will greatly assist you in order to increase your score.

Financial Crossroads

Whenever you are in trouble with credit card debt, a foreclosure, a repossession, the IRS, or even when relationship troubles start raring their ugly heads because of the financial quicksand you are being pulled towards...stop what you are doing and get professional help.

That professional help should be from an experienced attorney, not a company which you might question a potential conflict between you and your creditors' interests.  It should also come from an experienced attorney who will charge you a very affordable fee for excellent personal service and legal representation.

If you are facing a financial problem, why would you seek the advice of a "document preparer?"  You should seek advice from an experienced litigator who knows what it looks and smells like in the courtroom.  Feel free to call us for a free initial consultation.  Do not squander your savings or financial future.

We can help you. 

Welcome to Our Law Firm Blog

Things change quickly in the legal world. Every day, law makers and judges make thousand of decisions that impact the way cases should be properly prepared and presented for court. At Pelley Law Office in Plano and Sherman, we know how important it is to stay current with legal issues that may affect our clients in North Texas. We stay updated on recent caselaw that will have an impact on the strategies we use to protect you.We also know that keeping you informed about the legal process will help you make better decisions about your own case. This Blog page is intended to serve as a forum for discussing relevant issues in business and consumer bankruptcy, criminal defense and family law. Periodically, we will update the information and Blog topics, so please return often to see our most current post and comments. Pelley Law Office has always placed an emphasis on personalized attention and responsiveness to our clients' concerns. Your input means a lot to us, and we take your comments seriously. We invite your feedback about this and future Blog posts on this page.  Thank you for visiting.

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