Personal Bankruptcy Laws For Dummies E-Book

James P. Caher

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch

Seitenzahl: 556

Veröffentlichungsjahr: 2011

Beschreibung

With tips on understanding -- and surviving -- the new bankruptcy laws

If you're considering bankruptcy, you need straightforward answers and reliable advice. This handy guide covers it all -- so you can get your finances in line and your life back on track. This updated new edition covers everything you need to know about the new bankruptcy law and includes even better resources. Don't get desperate -- get out of debt instead!

Discover how to
* Weigh the consequences of bankruptcy
* Manage your spending
* Find professional help you can trust
* Decide on the right type of bankruptcy
* Pass the means test
* Keep more of your stuff

Leseprobe

Personal Bankruptcy Laws For Dummies®, 2nd Edition

by James P. Caher and John M. Caher

Personal Bankruptcy Laws For Dummies®, 2nd Edition

Published byWiley Publishing, Inc.111 River St.Hoboken, NJ 07030-5774www.wiley.com

Copyright © 2006 by Wiley Publishing, Inc., Indianapolis, Indiana

Published simultaneously in Canada

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Library of Congress Control Number: 2005935153

ISBN-13: 978-0-471-77380-1

ISBN-10: 0-471-77380-8

Manufactured in the United States of America

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2B/RS/RS/QV/IN

About the Authors

James P. Caher, a practicing attorney with 30 years of experience, is a nationally recognized expert on consumer bankruptcies and authority on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Jim coauthored, with his brother John, Debt Free! Your Guide to Personal Bankruptcy Without Shame (Henry Holt, 1996) and two highly regarded books for lawyers: Discharging Marital Obligations in Bankruptcy (LRP, 1997) and Discharging Credit Card Debts in Bankruptcy (LRP, 1998).

In addition, Jim has published scores of articles for bankruptcy professionals and is frequently called upon to analyze and interpret the complicated provisions of the 2005 bankruptcy law. He was labeled the “online guru” by a national legal weekly because of his regular appearances on the Internet as an expert analyst on bankruptcy law. Jim also serves on the editorial board of the American Bankruptcy Institute.

Jim graduated from Niagara University and then earned his law degree from Memphis State University Law School, where he was a member of the Law Review and recipient of the American Jurisprudence Award for Excellence in the field of debtor-creditor relations. He filed his first consumer bankruptcy case shortly after graduating in 1975. Jim lives and practices in Eugene, Oregon.

John M. Caher is a legal journalist who has written about law and the courts for most of his 25-year career.

Currently the Albany bureau chief for the New York Law Journal, John previously was state editor and legal affairs reporter for the Times Union of Albany, New York. His legal reportage has won more than two dozen awards, including prestigious honors from the American Bar Association, the New York State Bar Association, the Erie County Bar Association, and the Associated Press.

John coauthored, with his brother Jim, Debt Free! Your Guide to Personal Bankruptcy Without Shame (Henry Holt, 1996). He is the author of King of the Mountain: The Rise, Fall and Redemption of Chief Judge Sol Wachtler (Prometheus Books, 1998). In addition, John was the principal writer assisting former U.S. Treasury Secretary William E. Simon in preparation of his memoirs. Mr. Simon’s autobiography, A Time for Reflection, was published in 2003 by Regnery.

John is a 1980 graduate of Utica College of Syracuse University, where he received his bachelor’s degree in journalism, and a 1993 graduate of Rensselaer Polytechnic Institute, where he earned a master’s degree in technical communications/graphics. John lives in Clifton Park, New York.

Dedication

This book is dedicated to the memory of our parents, James C. and Dolores Caher (a.k.a. “Big Jim and Fitz”), who died way before their time but left us with their own life examples of personal responsibility, fairness, justice, affinity for the underdog, basic decency, and common sense. It is also dedicated to the five grandchildren they should have known and would have adored and enjoyed beyond measure: Sean and Brendan Caputi of East Aurora, New York, and Erin, Kerry, and Norah Caher of Clifton Park, New York.

Authors’ Acknowledgments

For the second edition of this book, just like the first, our respective spouses Kate Donnelly and Kathleen Caher were there every step of the way with their love, support, and encouragement.

Also for the second edition of our book, just like the first, Michael J. O’Connor took time from his busy law practice to offer expert analysis of our effort. Mike, an outstanding bankruptcy attorney in his own right and prominent partner in O’Connor O’Connor Mayberger & First PC in Albany, New York, has always been there when we needed him, and we would like to publicly acknowledge our humble appreciation for his efforts.

We also acknowledge the continuing dedication of our long-time agent, Sheree Bykofsky of Sheree Bykofsky Associates in Manhattan, and the insights of the talented folks at Wiley Publishing who made this come together, especially our project editor, Kelly Ewing, and acquisitions editor, Stacy Kennedy.

Publisher’s Acknowledgments

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Acquisitions, Editorial, and Media Development

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Contents

Title

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Icons Used in This Book

Where to Go from Here

Part I : Bankruptcy: The Big Picture

Chapter 1: Considering Bankruptcy

Viewing Bankruptcy in a Historical Context

Debunking Bankruptcy Myths

Understanding What You Can Gain Through Bankruptcy

Knowing What You Can Lose in Bankruptcy

Considering Alternatives to Bankruptcy

Introducing the Different Types of Personal Bankruptcy

Weighing the Consequences of Not Filing Bankruptcy

Using the Statute of Limitations

Chapter 2: Stopping the Bleeding

Realizing You’re Not Alone

Preventing Further Damage Now

Comparing Your Income with Your Spending

Assessing Your Spending Habits

Getting a Handle on What You Own

Figuring Out How Much You Owe

Chapter 3: Meeting the Players

Finding Professional Help

Getting to Know the Players

Chapter 4: Deciding Which Type of Bankruptcy Is Best for You

Deciding Whether to Fly Solo or As a Married Couple

Looking at Your Probable Bankruptcy Choices

Deciding Between Chapter 7 and Chapter 13

Considering Other Types of Bankruptcy

Changing Your Mind

Chapter 5: Confronting the Means Test

Putting the Means Test in Perspective

Taking the Median Test

Deducting Your Expenses and Taking the Means Test

Figuring Out How Much of Your Debts You Can Pay

Passing the Means Test by Showing “Special Circumstances”

Considering Ways around the Means Test

Getting Kicked Out of Chapter 7 for Abuse

Chapter 6: Getting from Here to There: The Bankruptcy Process

Navigating the BARF Maze

Getting Organized Before Talking to a Lawyer

Meeting Your Lawyer for the First Time

Arranging for Credit Counseling

Completing the Paperwork

Filing Your Bankruptcy Case

Using the Automatic Stay

Receiving Notice of the Creditors’ Meeting

Supplying Copies of Tax Returns

Attending the 341 Meeting

Signing Up for Your Financial Management Course

Working Your Way through Chapter 7

Working Your Way through Chapter 13

Comparing the Chapter 7 and Chapter 13 Process

Part II : Avoiding Bankruptcy

Chapter 7: Considering Alternatives to Bankruptcy

Appreciating the Negative Consequences of Bankruptcy

Looking at Remedies Other Than Bankruptcy

Choosing Which Bills to Pay First (If at All)

Negotiating with Your Creditors

Considering Credit Counseling Services

Simply Ignoring Creditors

Chapter 8: Handling Bill Collectors

Taming the Toothless Tiger: The Bill Collector

Invoking Federal Law

Tapping State Laws

Keeping Your Dukes Up

Chapter 9: Negotiating with the IRS

Looking at the Tax Collection Process

Making Nice with the Touchy-Feely IRS

Submitting an Offer in Compromise

Getting Help from a Taxpayer Advocate

Part III : Keeping Your Stuff

Chapter 10: Understanding Which Assets Are Off Limits to Creditors

Grasping the Legal Concepts

Determining the Value of Your Stuff

Understanding How the Courts View Certain Assets

Creating Exemptions

Chapter 11: Dealing with Secured Debts

Getting the Lowdown on Liens

Identifying Different Kinds of Liens

Dealing with Liens in Bankruptcy

Using the Special Powers Afforded Chapter 13 Filers

Dealing with Rent-to-Own Contracts

Banging the Gavel on Judgment Liens

Chapter 12: Saving Your Home

Your Home, Your Castle — and Sometimes Your Hassle

Dealing with Jointly Owned Property

Understanding How Foreclosures Work

Heading off the Homewreckers

Using Truth-in-Lending Laws

Coping When Your Dream Home Becomes a Nightmare

Part IV : Getting Rid of (Most of) Your Debt

Chapter 13: Lingering Obligations

Recognizing (Possibly) Indelible Debts

Nondischargeable Debts in Chapter 7 versus Chapter 13

Sweating Out the 60-Day Bar Date

Avoiding the Urge to Borrow to Pay Nondischargeable Debts

Understanding Reaffirmation Agreements

Having Your Discharge Denied or Revoked

Chapter 14: A House of Cards: Wiping Out Credit-Card Debts

Playing the Credit-Card Game

Seeing What Judges See

Examining Your Mind Set When You Incurred the Debt

Forcing the Credit-Card Company to Prove Its Case

Explaining Presumptively Fraudulent Charges

Defending Against False Financial Statement Allegations

Using Credit-Card Advances for Gambling

Bullying the Credit-Card Bullies

Transferring Credit-Card Balances

Chapter 15: Give unto Caesar: Using Bankruptcy to Deal with Tax Debts

Getting a Handle on What Happens to Taxes in Bankruptcy

Wiping Out Dischargeable Income Taxes

Paying Nondischargeable Priority Income Taxes

Coping with Nondischargeable Nonpriority Income Taxes

Confronting Unfiled Tax Returns

Coping with Interest and Penalties

Managing Federal Tax Liens

Making the Trustee Pay Your Taxes

Keeping on Top of Postpetition Taxes in Chapter 13

Paying Taxes Before Bankruptcy

Using the Statute of Limitations to Escape Taxes

Facing the Consequences if You’re a “Tax Protestor”

Dealing with the State Tax Man

Addressing Taxes Other Than Income Taxes

Obtaining Loans to Pay Your Taxes

Chapter 16: The Devil Made Me Do It: Fines, Fraud, and Other Foibles

Dealing with Debts Resulting from Fraud

Willful and Malicious Behavior

Covering Fines, Penalties, and Restitution Orders

Accepting Responsibility for Drunken-Driving Injuries

Chapter 17: Till Debt Due Us Part: Bankruptcy and Divorce

Introducing Key Points

Planning Your Strategy

Understanding How Support Obligations Are Treated in Bankruptcy

Understanding How Property Divisions Are Treated in Bankruptcy

Other Grounds for Bankruptcy-Proof Marital Debts

Chapter 18: Student Loans and Other Mind Games

Understanding the Student-Loan Industry

Tracing Your Loans

Knowing What They Can Do If You Don’t Pay

Managing Student Loans with Bankruptcy

Managing Student Loans without Bankruptcy

Part V : Strategies for a Successful Bankruptcy

Chapter 19: Avoiding Troubles with Your Trustee

Playing by the Rules and Telling the Truth

Accurately Listing Your Assets

Appreciating the Trustee’s Ability to Recover Assets

Protecting Your Discharge

Chapter 20: Living on the Edge in Chapter 13 Bankruptcy

Creating a Realistic Plan

Keeping Your Lawyer in the Loop

Blowing It . . . Again? Not!

Tackling Car and Mortgage Payments Outside the Plan

Addressing Debts Incurred After You File

Sinking Your Ship before It Arrives

Tying Things Together

Part VI : Enjoying Your Fresh Start

Chapter 21: Repairing Your Credit

Realizing that You’ve Already Taken the First Step by Filing Bankruptcy

Using the Fair Credit Reporting Act to Your Advantage

Getting Your Credit Reports after Bankruptcy

Obtaining New Credit

Watching Our for Credit-Repair Scams

Establishing Good Credit When You’re Married

Chapter 22: Staying Out of Financial Trouble

Addressing Compulsive Spending

Building a Consensus with Loved Ones

Using a Budget

Avoiding Temptation

Making a Few Lifestyle Changes

Recognizing Danger Signs

Part VII : The Part of Tens

Chapter 23: Ten Common Bankruptcy Mistakes

Borrowing Money from Relatives

Repaying Money Owed to Relatives

Chipping Away at Debts with a Home-Equity Loan

Draining Retirement Accounts to Pay Debts

Neglecting to Accurately List All Creditors

Concealing Your Assets

Transferring Assets to Keep Them Away from Creditors

Making Payments that You Can’t Afford to Make

Thinking that Bankruptcy Is Your Last Resort

Filing Bankruptcy Too Soon

Chapter 24: Ten Things You Can Do Right Now to Ease Your Financial Woes

Stop Feeling Guilty

Cut Up Your Credit Cards

Order Your Credit Reports

Keep Track of Everything You Buy

Get Your Name off Any Joint Accounts

Stop Making Partial Payments on Credit-Card Bills

Call a Lawyer Now If You’re Being Sued or Foreclosure Is Underway

Find Out How Much Your Home and Car Are Worth

Empty Accounts in Banks Where You Owe Money

Sharpen Your Pencil and Start Filling Out the Worksheets in Chapter 2

Chapter 25: Ten Common Questions about Bankruptcy

Will Bankruptcy Damage My Credit Rating?

Will Bankruptcy Affect My Job?

Will I Lose My Home?

Will I Lose My Personal Belongings?

Will I Ever Be Able to Buy a House?

Does My Spouse Have to File Bankruptcy, Too?

Can I Keep Some Debts Off My Bankruptcy and Deal with Them Separately?

Can I Cancel My Bankruptcy If I Change My Mind?

Is Filing Bankruptcy a Long, Protracted Process?

Does It Cost a Bundle to File?

Will BARF Make it More Painful to File Bankruptcy?

Appendix: Homestead Exemption Laws

Choosing between Federal and State Exemptions

Identifying the Federal Homestead Exemption

Surveying State Homestead Exemptions

Introduction

Welcome to the second edition of Personal Bankruptcy Law For Dummies — your antidote to BARF (Bankruptcy Abuse Reform Fiasco).

You’re probably in financial trouble, or you wouldn’t have picked up this book. Unfortunately, your troubles got a lot more complicated in October 2005, when a law new drastically altered the time-honored and court-tested rules of bankruptcy and changed much of what we told you in the first edition.

It’s officially called the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 — a euphemism if ever there was one. Many judges and other bankruptcy judges know it by a more colorful and, we think, more accurate name: BARF. And that’s how we generally refer to it in this book.

BARF was bought and paid for by creditors, and there’s almost nothing in this 501-page “amendment” to the Bankruptcy Code that spells anything but “indigestion” for the average consumer. That said, there are ways to keep BARF at bay. If you know some tricks, you’ll make out just fine. You just have to know where to step and not step. In this book, we show you the way.

About This Book

If you ever go to Ireland, an Irish phrase that you just have to know is “It’s clearly signposted all the way.” It usually comes up in a tavern, or anywhere else you may stop to ask for directions. Invariably, you’ll be sent on your merry way with these promising words.

Now, the ignorant may assume that phrase means that the way to your destination is obvious, and prominent signs appear anywhere you can make a wrong turn. But, what a foolish assumption! What it really means is that no such signs are anywhere to be found, and you’re going to get hopelessly lost. That’s how our ancestors got here. One wrong turn in Dublin, and, the next thing they knew, they were in Buffalo.

What’s that have to do with bankruptcy? Nothing, except that most of the bankruptcy books we’ve encountered are “clearly signposted all the way” and about half as understandable as an Irish roundabout. Do you go around the traffic circle to the left or right when you drive on the left, and how come there’s a cow in the passing lane? You just can’t get there from here without wading through a mountain of manure.

So we, The Brothers Caher, decided to make the world of bankruptcy a little more intelligible and a little more navigable. Yeah, we thought about fixing Ireland first, but getting lost adds to the fun and charm of our ancestral homeland. Nothing’s fun or charming about getting lost in the dragon-plagued dungeons of bankruptcy law, especially when it’s raining BARF.

Conventions Used in This Book

We’re pretty conventional guys, and here are some of the conventions used in the book:

Debtor is you, the person who owes someone else money. Also, a person filing bankruptcy is called a debtor instead of a “bankruptcy.” Court, unless otherwise stated, means U.S. Bankruptcy Court. Trustee is the Chapter 7 Bankruptcy trustee. Credit-card company refers to banks and other lending institutions that issue loans processed by companies like Visa and MasterCard.

BARF (Bankruptcy Abuse Reform Fiasco) is the monument to Murphy’s Law that made such a mess of consumer bankruptcies.

And Congress refers to the knuckleheads in Washington who replaced a law they didn’t understand with one they haven’t read to fix a problem that doesn’t exist, requiring you to wallow in BARF and us to rewrite our book.

What You’re Not to Read

Feel free to cherry pick. If you’re looking for just-the-facts-ma’am, gloss over the aptly designated Technical Stuff (you can always go back if you need more than a bird’s eye view). You can skate by the anecdotes (all tagged with an icon) and the sidebars (the stuff printed on gray background) as well.

Foolish Assumptions

We assume that you understand the English language and never went to law school. To that end, unless we tell you otherwise, a word means what it means in plain-old English, not legalese. If we’re about to get all lawyerly on you, we warn you.

How This Book Is Organized

So you’re thinking that perhaps, just perhaps, bankruptcy is your way out? You may be right. We guide you through all the thickets of bankruptcy law so that you can figure that one out for yourself. This book covers everything you need to know, and we’ve tried real hard to organize a ton of material so that you can immediately put it to practical use. Here’s a brief rundown of what you find in each section of the book.

Part I: Bankruptcy: The Big Picture

Torn over the question of whether bankruptcy is for you? The aim of this first part is simply to put your mind at ease and get you to evaluate the bankruptcy option on a simple, objective, intelligent standard: Do the benefits outweigh the drawbacks? We explain the process and the pitfalls and, as an added bonus, we describe some quick and effective ways to immediately stop the financial bloodletting. We also include a brand new chapter just on the “Means Test,” the lynchpin of BARF.

Part II: Avoiding Bankruptcy

Most folks will do almost anything to avoid bankruptcy, and all too many only make matters worse by putting off that day of reckoning. We understand your reluctance to file bankruptcy (although in our experience, people are usually better off filing bankruptcy sooner rather than later). In this section, we explain a variety of debt-busting techniques to keep the bill collectors off your back until you get on your feet again.

Part III: Keeping Your Stuff

The credit industry would have you believe that when you file bankruptcy, an army of predators and scavengers descends on the tranquility of your homestead and yanks the bowl of porridge right out from under your kids’ spoons. Well, the fact of the matter is that although you may — may — lose some of your possessions in bankruptcy, the really important stuff is strictly off-limits to your creditors. This section spells out what’s yours, what’s potentially at stake, and what you can do to make sure that your most important possessions remain in your own good hands.

Part IV: Getting Rid of (Most of) Your Debt

Bankruptcy eliminates most of your debts, but some problems (like taxes, child support, and school loans) may stick around even if you file. In this section, we explore those lingering obligations and explain what you can do to get the biggest bang for your bankruptcy buck.

Part V: Strategies for a Successful Bankruptcy

With apologies to Yogi Berra, “It ain’t over ’til it’s over” — and in some cases, it ain’t even over when it’s over. You have to put in a little effort to get the most relief from your bankruptcy filing. This section offers oodles of suggestions about how you can make the process run smoothly and effectively, and how you can avoid some troublesome traps.

Part VI: Enjoying Your Fresh Start

Phew! You made it. You survived bankruptcy, and you’re determined to never return to the bad old days of debts, delinquencies, and diabolical collection agents. Thanks to the American tradition of justice, fair play, and sympathy for the underdog, you have a new lease on your financial life. Here, we work on restoring your credit and, once and for all, putting all your bad financial experiences behind you.

Part VII: The Part of Tens

Hey, this wouldn’t be a For Dummies book without the tens — and we include such nuggets as the ten most common questions that we get about bankruptcy and the ten things you can do right now to ease your mind. In fact, you may want to scan the common questions right now.

Icons Used in This Book

Your road to financial salvation has many twists and turns, and you have to know when to zig and when to zag. So we include a bunch of eye-catching, head-bopping iconic reminders to draw attention to particular points or hazards and to warn you in advance of the boring technical stuff.

These little bull’s-eyes point out helpful tidbits and strategic moves you or your lawyer may want to consider.

This icon points out the legal and logistical bombs that may blow up in your face if you’re not minding your p’s and q’s.

These icons are reminders of points made previously. An awful lot of information is included in this book, and we don’t expect you to keep it all in your head. This is a gentle reminder.

Yikes, some complicated, convoluted information is coming your way! We’ve made it as easy to understand as possible, but some stuff is just plain mind-boggling. Dive in at your own peril. We won’t be offended, however, if you skip ahead. Well, Jim (the lawyer) may be offended. Forget about him.

The rules for what’s called a Chapter 7 bankruptcy — one where you wipe out all your debts and surrender certain assets — are different from the other most common consumer bankruptcy, a Chapter 13. When you see this icon, you know we’re talking only about Chapter 7.

The rules for what’s called a Chapter 13 bankruptcy — one where you pay off a portion of your debts over time — are different from the other most common consumer bankruptcy, a Chapter 7. When you see this icon, you know we’re talking only about Chapter 13.

Legal principles are much easier to understand when you can see how they apply in the real world. We include plenty of examples and identify them with this icon.

Where to Go from Here

Relax. As daunting as all this information seems, it’s really not that bad. We suggest reading the first two chapters from start to finish now, before flipping to the stuff that’s really worrying you (taming bill collectors, dealing with the IRS, and so on). In short order, you’ll have a pretty good idea of whether bankruptcy is right for you.

Part I

Bankruptcy: The Big Picture

In this part . . .

I s bankruptcy the best option for you, or even an option for you? What happens if you file? What happens if you don’t? And what’s this new bankruptcy law mean? Do you need a lawyer? How can you stop the hemorrhaging? Where do you even start? If you don’t already know the answers to these questions — and maybe even if you think you do — start your journey here. Many people begin with the assumption that even considering bankruptcy is an admission of failure. Actually, it can be a first step toward taking responsible control of your financial future. Read this part to see how bankruptcy is a legitimate tool and to understand the implications of exercising — and not exercising — your right to a fresh start.

Chapter 1

Considering Bankruptcy

In This Chapter

Understanding the history and tradition of bankruptcy

Dispelling myths about bankruptcy

Discovering what you can gain in bankruptcy

Recognizing what you may lose in bankruptcy

Knowing the consequences of not filing bankruptcy when you qualify

Maybe you were socked with an unexpected and uninsured medical expense, and you didn’t have the savings to cover the bills. Perhaps you lost your job, and you can no longer juggle your car and mortgage payments. Maybe you dipped into personal assets in a desperate (and futile) bid to salvage your business. Perchance your husband split and left you holding a big bag of joint debts. You likely bought into the easy-credit, instant-gratification, shop-till-you-drop mentality encouraged by lenders and retailers and found yourself mired in financial quicksand. In any case, things got out of hand and now you’re up to your ears in debt.

Finance companies are warning that if you don’t pay up, and soon, they’re going to take your home and car. Credit-card firms are threatening to haul your butt into court. Debt collectors are pursuing you relentlessly. Your finances are a disaster. Your personal and professional relationships are strained. You’re losing sleep, and you’re becoming a perfect candidate for ulcers. Welcome to the club. Millions of Americans are in the same leaky boat.