DAVID C. HOSKINS Attorney at Law

Transcription

1 1888 Sherman St., Ste. 650 Denver, CO DAVID C. HOSKINS Attrney at Law ADVICE BEFORE FILING BANKRUPTCY (720) Thank yu placing yur cnfidence in ur firm fr bankruptcy representatin. Refer creditrs wh telephne yu t us; tell them t call at that number, creditrs will hear a recrded message that cnfirms that yu have retained ur ffice fr bankruptcy. (except, DO NOT tell secured creditrs, like hme r car lan lenders, that yu are filing bankruptcy). The fllwing infrmatin will answer many questins abut bankruptcy and the prcess f filing yur bankruptcy. If yu have questins r need assistance: First, write yur questins dwn; Secnd, review these materials fr answers; Third, g t fr answers; Furth, bring yur questins t ur review cnference; and Finally, if yu can t find the answer and need an answer befre we can meet fr review, send an t dchskins@cmcast.net and Mr. Hskins will respnd within 24 hurs (r the next business day). DO NOT DO THE FOLLOWING, withut first cnsulting with Mr. Hskins: D NOT make changes in the way yu cnduct yur financial affairs, except as indicated belw. D NOT mve ut f yur residence (if it has a mrtgage), nr turn in yur car, nr surrender any mrtgaged real r persnal prperty. D NOT transfer mney r prperty, repay lans, dispse f assets r give anything t friends, relatives r clse business assciates. D NOT use yur credit cards r therwise incur mre debt. D NOT spend mney fr anything that is nt necessary fr living. If yu are expecting t receive r have received a lump sum f mney prir t bankruptcy filing, cntact Mr. Hskins by , BEFORE initiating the prcess t receive the mney and BEFORE yu spend the mney r pay anyne. This includes tax refunds. D NOT make any sales, purchases, withdrawals r ther financial transactins, ther than fr nrmal living expenses; D NOT purchase a car, huse, r anything with a value f $1,000 r mre; D NOT depsit mney int a bank accunt where yu we mney r t any Wells Farg accunt. If yu maintain a checking r savings accunt at a financial institutin (bank, credit unin) t which yu we n an unsecured debt, such as a prmissry nte, ready reserve, credit card, lan, line f credit, r aut r hme lan, make n further depsits, and allw yur balance t decrease t zer, the bank will clse yur accunt. D NOT use persnal checks, debit cards, r autmatic withdrawals t pay bills within 2 weeks f filing yur bankruptcy (Yur case wn t be filed until yu have cmpletely reviewed yur bankruptcy dcuments with Mr. Hskins and yu have agreed when t file yur case). Within 2 weeks f filing yur case, we suggest that yu pay bills with mney rders r cashier checks until after yur case is filed. D NOT make payments f mre than $50/mnth t unsecured creditrs (like credit cards r medical bills) prir t filing bankruptcy. TAKE THESE ACTIONS: Open a new bank accunt(s), at a bank where yu d nt we mney (d nt bank at Wells Farg!). Page 1 f 10

2 TABLE OF CONTENTS Bankruptcy Prcess Case Preparatin 3 Case Filing & Ntice t Creditrs 3 Creditrs Meeting & Case Administratin 3 Chapter 7 4 Chapter 13 4 Miscellaneus Issues Prperty f the Bankruptcy Estate 6 Cash Resurces 6 Real Estate 6 Exemptins 7 Inheritance r Life Insurance Prceeds 7 Prperty Settlement in Divrce 7 Debt 7 Secured Debt 7 Discharge f Secured Debt 8 Nn-dischargeable Debt 8 Utility Bills 9 Persnal Prperty Lans and Leases 9 Cmmunicatins with Creditrs 9 Curt Appearances 10 Change f Address 10 Divrce r Legal Separatin 10 Page 2 f 10

3 Case Preparatin: BANKRUPTCY PROCESS Wrksheet & Required Dcuments: It is yur respnsibility t cmplete the wrksheet and return it, with required dcuments, t ur ffice. Preparatin f yur case cannt begin, until we receive all requested infrmatin. Draft Curt Dcuments: Frm the infrmatin yu prvide t us (wrksheet and required dcuments), we will prepare a draft f the Petitin, Statement f Financial Affairs, Schedules A thrugh J, Means Test, and ther required dcuments. We will send these dcuments t yu fr review, alng with a letter that advises yu f missing infrmatin and f the next step. It is very imprtant that yu review and make crrectins (r ask questins) n the draft dcuments, and bring them with yu t the Review Cnference. Review Cnference: Yu and Mr. Hskins will review the draft dcuments (as crrected by yu), tgether, page-by-page and line-by-line, until all the required infrmatin is cmplete and accurate. Once the dcuments are cmplete and accurate, they are ready t sign and file. Yu and Mr. Hskins will decide tgether when t file yur case. When yu are ready, yu will sign the petitin, the statement f financial affairs, schedules, and ther required dcuments. Case Filing & Ntice t Creditrs: Case Filing: On r abut the agreed date fr filing yur case, ur ffice will electrnically file yur case (as crrected) with the U.S. Bankruptcy Curt, District f Clrad. Yu dn t need t d anything further t make that happen. Immediate Ntice t certain creditrs: If yu have a garnishment, repssessin, r freclsure pending, as sn as a case number has been assigned, ur ffice will immediately fax and/r a ntice f yur bankruptcy t yur emplyer (ONLY if wages are being garnished), the creditr s attrney (if garnishment, repssessin r freclsure is pending), and the public trustee f yur cunty (if freclsure pending). Ntice t yu: We will als send yu an letting yu knw that yur case has been filed, the case number, and the date f the creditrs meeting. Within the next tw weeks, yu will receive mre detailed infrmatin and instructins fr the next steps. Ntice t yur creditrs: The bankruptcy curt will mail ntice f yur bankruptcy t all creditrs listed in yur case, within a week f the date f filing. Yu will receive in the mail a cpy f the ntice that has been sent t yur creditrs. Creditrs Meeting & Case Administratin: Frmat f Meeting: The meeting will be held in a meeting rm, pen t the public. Generally, there are ther flks ging thrugh bankruptcy, their attrneys, and attrneys representing creditrs in the rm. The meeting will be electrnically recrded and yu will be answering the questins f the Trustee and creditrs under ath. We will prvide yu with a list f frequently asked questins. Representatin: Mr. Hskins will meet with yu befre the meeting, just utside the meeting rm, and answer any last minute questins. He will be at yur side during the meeting and will represent yur interests in the meeting. Creditrs Yur creditrs may appear at the meeting and ask yu questins abut yur finances. Generally, creditrs d nt appear. In the rare circumstances when creditrs appear, it is because they believe they have a legitimate bjectin t the discharge f their claim. If we are aware f creditrs with legitimate bjectins, we will discuss it and prepare yu fr that questining. Objectins t Discharge If the Trustee r any creditr has an bjectin t yu receiving a bankruptcy discharge, they must file an bjectin within 60 days f yur creditrs meeting. If we are aware f any reasn fr an bjectin t yur bankruptcy discharge, we will discuss it and prepare yu fr that pssibility. Preparatin: Within tw weeks after filing yur case, we will send yu instructins fr preparing fr yur creditrs meeting. At a minimum, we will require bank statements that shw the balance f yur bank accunts n the date that we filed yur case and a paystub that shws what was wed t yu n that same date (the first ne received just after we filed). Tax Returns: It is required by law that we prvide the trustee a cpy f yur mst recently required and filed tax return, n less than 7 days befre the meeting. We shuld already have yur mst recent Federal and state tax returns in ur file. If yu file a tax return after we file yur case, but befre the creditrs meeting, please prvide ur ffice with a signed cpy and we will deliver it directly t the lcal IRS ffice and the Clrad Department f Revenue. Prf f Identity: It is very imprtant that yu have a valid, gvernment issued, identity card that has yur pht n it and yur riginal, signed scial security card fr the meeting f creditrs. If yu d nt present these tw frms f identificatin at the meeting, the trustee may dismiss yur case. Page 3 f 10

4 Chapter 7 Chapter 13 Trustee Infrmatin Sheet We will send yu a blank Trustee Infrmatin Sheet that must be cmpleted and returned t ur ffice, ne week befre the creditrs meeting, alng with ther dcuments requested in ur written instructins. Chapter 7 Trustee Eligibility t receive a discharge The Trustee must verify that yu are eligible t receive a chapter 7 discharge (we have already determined that yu are eligible frm the infrmatin yu have prvided) Nn-exempt assets The Trustee will ask abut yur statement f financial affairs and schedules t determine whether yu have any unprtected (nn-exempt) assets that he can cllect and sell t pay yur creditrs (we have already discussed this there shuld be n surprises) Exemptins We have claimed all exemptins available t prtect yur assets, in Schedule C. If the Trustee disagrees with the exemptins that have been claim, he/she must file an bjectin within 30 days f the creditrs meeting Cllectin f Assets If the Trustee is ging t cllect assets frm yu, he/she will ask yu t sign an agreement that specifies what yu will be required t turn ver. Chapter 7 Discharge Unless sme interested party bjects and the curt finds a legal cause fr that bjectin, n sner than 60 days after the creditrs meeting, the curt will issue an rder discharging yur debts. Exceptins t Discharge Certain debts are nt discharged, such as mst tax debt, mst student lan debt, dmestic supprt bligatins, debts arising ut f criminal actins, HOA dues accruing after filing f the case, debts allcated t yu in a divrce, and certain debts fr which the creditr must file a separate actin in bankruptcy curt t prve cause fr nn-dischargeability (such as debt incurred thrugh fraud). Secured Debt Debt that is secured by cllateral (such as yur hme mrtgage r a car lan) is als discharged in chapter 7, but the lender s lien is unaffected (if yu default in payments, the lender can still freclse n yur hme r repssess yur car). Chapter 13 Plan With yur petitin, we will file a prpsed chapter 13 plan. We will prepare this plan based n the infrmatin that yu prvide and we will review it with yu, befre it is signed by yu and filed with the curt. In that plan yu must pay the fllwing: Unpaid Attrney Fees In ur fee agreement, we will prvide fr payment f a certain amunt f attrney fees befre yur case is filed and the balance thrugh yur chapter 13 plan payments. The ttal amunt f attrney fees paid t ur firm will be determined by the Bankruptcy Curt Judge. We can nly estimate the ttal amunt in the plan. We intentinally estimate an amunt in the plan that is greater than what we expect t charge t get yur chapter 13 plan apprved by the curt. Unpaid Dmestic Supprt Obligatins Yu must pay any currently wed child supprt and spusal supprt, as rdered by the family curt. 100% f any amunts f supprt bligatins that are past due must be paid ver the perid f yur chapter 13 plan. Unpaid Taxes Yu must pay 100% f any nn-dischargeable tax debt ver the perid f yur chapter 13 plan. Mrtgage and car lan arrears If yu want t keep yur hme and/r yur car, and yu are behind in payments, yu must pay 100% f the arrears thrugh yur chapter 13 plan. The regular mnthly payment due, beginning in the mnth after filing yur case, must be paid directly t the lender. Unsecured creditrs Thrugh yur chapter 13 plan, yu must pay yur mnthly dispsable incme t the unsecured creditrs (credit cards, medical prviders). Trustee s Fee The chapter 13 plan will prvide fr a trustee s fee f 10% f all mneys paid thrugh the plan. Chapter 13 Trustee Eligibility t receive a discharge The Trustee must verify that yu are eligible t receive a chapter 13 discharge (we have already determined that yu are eligible frm the infrmatin yu have prvided) Feasibility f Chapter 13 Plan The Trustee must determine whether yu are able t make the prpsed chapter 13 payments; d yu have enugh incme t pay yur living expenses and the plan payment; are yur living expenses reasnable Page 4 f 10

5 Payments t Creditrs The Trustee must determine whether yur plan pays an apprpriate amunt t yur unsecured creditrs. Best Interests f Creditrs Test Will yur creditrs receive as much thrugh yur chapter 13 plan as they wuld ve received in a chapter 7? In ther wrds, are the creditrs receiving an amunt equal t r greater than the value f yur nn-exempt assets? Dispsable Incme Des yur chapter 13 plan devte all f yur dispsable incme t yur unsecured creditrs? In ther wrds, is all f yur incme, less reasnable and necessary expenses ging t pay back yur unsecured creditrs? Chapter 13 Plan Cnfirmatin Cnfirmatin f yur plan is a prcess that begins with yur prpsed plan... Objectins t Chapter 13 Plan If the Trustee r any creditr has an bjectin t yur prpsed plan, they must file a written bjectin with the Bankruptcy Curt, 3 curt days befre the creditrs meeting. Reslving Objectins t the Plan If the Trustee r any creditr files an bjectin (they usually d), then we must either prepare an amended plan that reslves their bjectin, r we must tell the curt that we have a dispute that requires a hearing. Amended Plan Usually bjectins made t the prpsed plan are easily reslved; this is because we may nt have had all the necessary infrmatin available when we prepared the prpsed plan (like the crrect amunt due t the creditr usually tax debt and mrtgage r car lan arrears), r we made an errr in calculating the plan payments. Once we knw the crrect amunts t pay, we simply file an amended plan. The Curt will rder that ntice be given f any amended plans, with a definite date by which bjectins must be filed. If n bjectins are filed t the amended plan, then we file a Verificatin f Cnfirmable Plan letting the curt knw that it is prper t issue an rder apprving the plan. Cntested Cnfirmatin Hearing In rare circumstances, we may nt be able t reach an agreement with an bjecting creditr r trustee. Then we will ask the curt t schedule a hearing at which yu and ther witnesses will testify and we will present evidence t demnstrate t the curt that yur prpsed plan cmplies with the law and pays t creditrs an apprpriate amunt. This is mre expensive. Estimated attrney s fees and csts sufficient t pay fr this prceeding will be added t yur plan, and will a factr in the calculatin f yur plan payment. Cnfirmatin Order Either because n ne bjected r because the Bankruptcy Judge heard evidence and made a ruling in favr f the prpsed plan, an rder will issue that apprves the plan and requires that yu cmply with its prvisins; that is, make the required payments t the trustee and secured creditrs. Once the plan is cnfirmed, all f yur prperty is returned t yur abslute cntrl, except as prvided in the plan. Mdificatin f Chapter 13 Plan At any time during the perid f yur chapter 13 plan, if yur incme decreases r yur expenses increase, r if yu decide that yu can n lnger affrd t pay fr yur hme r yur car, yu may ask the curt t mdify yur plan. We will ask yu fr an updated budget and prf f incme, and prepare a mdified plan. It will be filed with the curt with a ntice setting a deadline fr bjectins. If n bjectins are filed, the curt will apprve the mdified plan and yu must make payments in accrdance with that plan. Chapter 13 Discharge Once yu have cmpleted all plan payments, we will assist yu in preparing a certificatin f yur eligibility fr a chapter 13 discharge, and we will file that with the curt. The trustee als must file a certificatin that yu have cmpleted the plan. Once the curt is satisfied that yu have cmpleted yur plan, it will rder the balance f yur unsecured debt discharged. Exceptins t Discharge Certain unpaid debts are nt discharged, such as mst student lan debt, debts arising ut f criminal actins, HOA dues accruing after filing f the case, and certain debts fr which the creditr must file a separate actin in bankruptcy curt t prve cause fr nndischargeability (such as debt incurred thrugh fraud r debts allcated t yu in a divrce which are in the nature f child supprt). Secured Debt Debt that is secured by cllateral (such as yur hme mrtgage r a car lan) is nt discharged in chapter 13, unless the cllateral is surrendered in the chapter 13 plan. Page 5 f 10

6 MISCELLANEOUS ISSUES OF INTEREST PROPERTY OF THE BANKRUPTCY ESTATE As f the date f filing bankruptcy, yur prperty legally belngs t the Trustee, subject t yur claimed exemptins. Nn-exempt prperty will be subject t being turned ver t the trustee (chapter 7) r the value f that prperty will becme the minimum amunt yu will pay t the bankruptcy trustee (chapter 13). CASH RESOURCES Large Amunts f Cash. If yu are expecting t receive r have received a lump sum f mney prir t bankruptcy filing, fr example, mnies frm a clsed PERA r stck accunt, 401(k) distributin, severance pay, lawsuit settlement, bnus, gift, inheritance, etc., cntact ur ffice fr advice BEFORE initiating the prcess t receive the mney and BEFORE yu spend the mney r pay anyne. Bank Accunts. D nt bank at Wells Farg Bank! Als, d nt bank at any bank where yu we mney. If yu maintain a checking r savings accunt at a financial institutin (bank, credit unin) where yu we a debt, such as a prmissry nte, ready reserve, Visa r MasterCard, aut lan, hme lan, r line f credit, d nt make any further depsits int that bank. Instead, yu shuld pen up a separate checking accunt at anther bank r credit unin. It is best t pen that new accunt prir t filing bankruptcy because sme banks will nt allw yu t pen an accunt after yu have filed bankruptcy. Autmatic payments t creditrs shuld als be stpped. Autmatic payments There are tw ways f setting up autmatic payments: 1 by setting up the payment thrugh yur bank; r, 2 by setting up the payment thrugh the creditr. We recmmend that yu set up autmatic payments thrugh yur bank; yu will have cntrl and can make changes mre easily. Direct depsits It is imprtant that yu stp immediately any direct depsits int a bank t which yu we mney and any direct depsits int a Wells Farg accunt. Bank Balances. Mney in bank accunts may be nn-exempt (that is, it can be taken by the bankruptcy trustee), depending upn the surce f the funds. T be safe, at the time f filing, the ttal in all bank accunts, shuld be belw $200. It is yur respnsibility t have yur accunt(s) under $200 when yur case is scheduled fr filing. If yur accunt balance will be mre than $200, please discuss with us at the time f signing. At the time f case filing, yu shuld call yur bank and cnfirm the balance and nt rely n the balance in yur check register. DO NOT write checks r make depsits within tw weeks f the anticipated filing date f yur petitin. If yu need t pay bills, then we recmmend that yu pay such bills with a mney rder r cashier s check. REAL ESTATE Freclsure. If yur real prperty has already been sld in freclsure, the filing f bankruptcy will nt return the prperty t yu. If the freclsure is pending and yu wish t keep the prperty, file a Ntice f Intent t Cure with the Public Trustee f yur cunty (frms fr that purpse may be btained frm the Public Trustee), and prvide ur ffice with a cpy f the Public Trustee s respnse, as sn as yu receive it. If yu wn investment real estate, be aware that shuld that prperty g int freclsure, unfavrable tax cnsequences may arise when there is a bankruptcy petitin in cnjunctin with a freclsure. Specifically, if yu have taken depreciatin expense deductins n past tax returns, the filing f the bankruptcy and eventual freclsure will result in the recapture f the depreciatin and a ptential tax liability. There may als be capital gains tax implicatins frm the freclsure. Please review this issue with yur tax preparer r accuntant s as t becme fully infrmed f the frthcming liability. Keeping Prperty that is Cllateral. Yur Hme: In Chapter 7, if yu wish t keep yur hme, just keep making mrtgage payments, maintaining insurance and paying prperty taxes. If, at any time, after the Chapter 7 discharge, yu decide yu can t make the payments, yu may simply let it g int freclsure; the lender will nt be able t sue yu fr the balance. Page 6 f 10

7 In Chapter 13, if yu wish t keep yur hme r ther real prperty, the Chapter 13 Plan must prvide fr payments; and, yu must cmplete the Chapter 13 Plan. In Chapter 13, if the amunt wed n yur 1 st mrtgage exceeds the value f the prperty, yu may be able t strip ff a 2 nd and subsequent mrtgages. Sale r Refinance. If yu plan t sell r refinance real prperty befre, during, r after bankruptcy, please cnsult with Mr. Hskins, befre yu cmmit yurself: - where yu live and whether yu are paying rent r a mrtgage will have an effect n the Means Test calculatin; and the title cmpany, befre yu can clse n a sale r refinance, will require an rder f abandnment frm the bankruptcy curt. Obtaining that rder requires extra fees and takes a minimum f 30 days t prcess. Please plan ahead by discussing this situatin with us and yur real estate agent well ahead f listing r selling yur prperty. Judgment Liens. We recmmend that yu btain an wnership & encumbrance reprt ( O&E ) n yur prperty t determine if any judgment liens exist. We can btain this reprt frm a Title Insurance cmpany at a small cst. Judgment liens may be remved frm the title t yur hme in sme circumstances. Please make an appintment with an attrney in ur ffice t discuss judgment liens n real prperty. Surrender. If yu are surrendering yur huse t the lender, and have mved ut, write t the lender and advise them f yur mve-ut and that the huse is vacant. Be sure t remve all persnal prperty frm the huse n r befre the sale date. Hwever, if yu vacate the prperty befre the freclsure sale and delivery f trustee s deed t the new wner, yu are still the wner and are still respnsible fr its maintenance and any damages that may be caused t thers n yur prperty. Mrtgage Lans. Yu must be current in yur huse payments upn filing bankruptcy. If yu are in default, the lender will begin immediately (within a few days f bankruptcy filing) the prcess f seeking the permissin f the bankruptcy curt t begin a freclsure. S lng as yu remain current, the lender cannt freclse (lan payments are typically due n the 1 st f the mnth and are IN DEFAULT ON THE 2 ND day f the mnth -Yu may nt rely upn grace perids, and will be assessed late charges if payments are nt made timely). Make yur mnthly payment even if yu d nt receive statements frm the mrtgage cmpany. First Time Hmebuyer s Credit: If yu have received a First-Time Hmebuyer Credit n yur federal incme taxes, depending n when yu purchased the hme, yu may be required t repay the amunt credited, as part f yur federal incme taxes, ver a certain perid f time. In additin, under certain circumstances, the entire amunt f the credit will becme due and payable in ne tax year. In any event, the ttal amunt f unpaid credit is a tax debt that must be reprted as debt in yur bankruptcy. Please cnsult with yur tax preparer regarding this issue t make sure yu are prceeding prperly. EXEMPTIONS Mst f yur prperty will be exempt, as the law recgnizes the necessity f certain things fr living. Fr a listing f available exemptins, please visit my website, Client Resurces ( It will be yur attrney s respnsibility t claim exemptins; be sure t ask abut available exemptins fr yur prperty. INHERITANCE r LIFE INSURANCE PROCEEDS Any inheritance r life insurance prceeds t which yu becme entitled, within 180 days after filing f yur bankruptcy, will becme prperty f the bankruptcy estate. It is yur bligatin t amend the schedules f assets in yur bankruptcy nce yu learn f any inheritance r life insurance prceeds. If that ccurs, please cntact ur ffice fr a cnsultatin. PROPERTY SETTLEMENT IN DIVORCE Any prperty settlement t which yu becme entitled, within 180 days after filing f yur bankruptcy, will becme prperty f the bankruptcy estate. It is yur bligatin t amend the schedules f assets in yur bankruptcy nce yu learn f any prperty settlement. If that ccurs, please cntact ur ffice fr a cnsultatin. DEBT SECURED DEBT If yu brrwed mney t purchase persnal prperty, such as an autmbile, r if yu have given prperty as cllateral n a lan, the creditr has a security interest in the prperty (fr example: by placing its name n the title f a vehicle). Since the valuatin f that prperty is very imprtant, yu shuld btain a trade-in value (what a dealer wuld pay, in cash, t buy it) f yur prperty by smene wh deals in that type f prperty. Fr auts, yu can check the r WARNING: If yu are planning t keep mrtgaged prperty (huse, cars, etc.), there are many lenders wh stp sending mnthly bills. They believe the bankruptcy cde prevents them frm sending bills; hwever, they may Page 7 f 10

8 send them t ur ffice. Our legal services cntract des nt include cmmunicating any infrmatin sent t us t be frwarded t yu. Therefre, yu shuld cntact the lender and request that they cmmunicate (mail) any lan infrmatin t yu. Surrendering. Befre surrendering prperty t the lender, discuss it with us, first. If we have advised yu t surrender yur car, take it t the lender s ffice and leave it. If yu take it n a Sunday and lck the keys inside, yu will avid being hassled. Then write a letter and infrm the lender what yu have dne. It is advisable that yu maintain insurance cverage, until ntified that the car will be sld, r fr at least a mnth after yu surrender the car. Recent purchases f persnal prperty that are titled by a certificate (e.g. autmbiles & mbile hmes) must be reviewed carefully fr prtectin f yur interests. If such prperty was purchased within 90 days f the filing f bankruptcy (12 mnths, if the lender is a friend, relative, r ther insider), the lien rights f lenders must be recrded n the certificate f title within 30 days f purchase, r the vehicle may be lst t the bankruptcy trustee. Crss-Cllateral. If yu have tw r mre debts wing t a credit unin r ther lender, ne f which is secured by a mtr vehicle, then the credit unin r lender may claim that the mtr vehicle is als security (crss-cllateral) fr the ther unsecured debt. In such event, they will refuse t release the title t the vehicle until ALL f their debt is paid, including any unsecured debt wing t them. Yu may either surrender the vehicle, in which case all f yur debt wing t them is discharged, r yu may keep the vehicle and cntinue t make payments until the autmbile lan is paid in full. Yu d nt have t pay mre than the balance wing n the vehicle lan, but the credit unin r lender will refuse t return the title certificate. Thus, yu risk paying ff the vehicle lan, but never being able t sell r trade-in the vehicle. In sme cases, creditrs have repssessed the vehicle due t an unpaid line f credit r credit card. Liens n Husehld Gds and Other Persnal Prperty. If yu brrwed mney t purchase husehld gds, the lender prbably has a purchase mney security interest (PMSI) in thse gds. In chapter 7, if yur husehld gds r ther persnal prperties are cllateral fr a PMSI lan (btained within ne year), the law requires that yu give a written statement f intentin, chsing between reaffirming yur lan fr the gds, redeeming the gds (purchasing at its current retail value), r surrendering it t the lender. Failure t chse ne f these ptins will result in the lender seeking t repssess. Because f the ecnmics f lending mney n husehld gds, in ur experience, it is unlikely that the lender will be interested in repssessing mst husehld gds. If yu are in default n the purchase f furniture and appliances, ur apprach is t d nthing and wait fr the creditr t make the first mve, then negtiate a reslutin. If yu have expensive husehld gds, tls r luxury items that are cllateral fr lans, it is imprtant that yu discuss them at an ffice cnference with ne f ur attrneys, befre we file yur case. If yu pledged yur husehld gds as cllateral t btain a lan, then that lien may be terminated by the curt, but yu must infrm us s that we can file the apprpriate mtin. In chapter 13, If yur husehld gds are cllateral fr a PMSI lan (btained within 1 year), the 2005 bankruptcy law requires that yu pay the PMSI creditr the retail replacement value f the item thrugh the Plan. DISCHARGE OF SECURED DEBT: A Chapter 7 discharge in bankruptcy ends yur persnal bligatin t pay the debts that are secured by real estate, vehicles r ther cllateral, whether yu are keeping the cllateral r nt. Hwever, the bankruptcy discharge des nt remve the lien, mrtgage, r deed f trust; thus, the lender will still have the right t repssess/freclsure in the event yu default in payments. A Chapter 13 discharge ends yur persnal bligatin t pay the debts that are secured by real estate, vehicles r ther cllateral, but nly if yu surrender the prperty t the lender as part f yur Chapter 13 Plan. If yu want t keep the cllateral (e.g. yur hme r yur car), yu must make prvisins in the Plan t pay any debt secured by that prperty. HOA dues and assessments incurred after yur case is filed are nn-dischargeable; s lng as yu wn the prperty, yu will have t pay the dues and assessments. Hwever, if yu are keeping yur hme, the HOA lien is nt affected by the bankruptcy discharge and yu will have t pay all dues & assessments. NON-DISCHARGEABLE DEBTS. Sme debts are nn-dischargeable. These debts include the fllwing: taxes; mney btained by fraud, false representatins, r under false pretenses; debts based n fraud while acting as a fiduciary; mitted creditrs; curt-rdered child supprt and alimny/maintenance bligatins; damages fr willful and malicius injury t a persn r prperty; and criminal fines, penalties, gvernment fines, student lans, educatinal verpayments, debts t pay taxes, fines r penalties, cndminium dues, assessments & bligatins under HOA cvenants, and drunk driving damages. Divrce prperty settlements and hld harmless cvenants are nt dischargeable in chapter 7, but they might be dischargeable in chapter 13. If these debts are nn-dischargeable, it means that the creditr will cntinue t cllect the debts. Sme gvernment creditrs may recup a nn-dischargeable debt by withhlding a payment due t yu. If Page 8 f 10

9 yu have persnally guaranteed repayment f a debt f yur business, yur persnal liability will be discharged; hwever, the liability f yur business (crpratin r limited liability cmpany) will be unaffected. CRIMINAL FINES AND PENALTIES. If yu have been fined because f criminal vilatins, including traffic ffenses, thse fines r restitutin rders are nt dischargeable in bankruptcy. Therefre, make plans t repay thse diligently, therwise the judge culd imprisn yu. Bad checks may r may nt be dischargeable. CHILD SUPPORT AND MAINTENANCE (Alimny) Current Payments. Current child supprt and maintenance rders are nn-dischargeable. Therefre, yur budget shuld reflect the amunts necessary t meet that bligatin. Bankruptcy des nt prevent a judge frm hlding a persn in cntempt and jailing a delinquent persn. If yu are the recipient f child supprt r maintenance, yu shuld reflect that n the incme sectin f the wrksheet. If the payments are nt made regularly, yu shuld average in the actual amunt f child supprt r maintenance yu are receiving int yur incme s that an accurate determinatin can be made f hw much available incme yu have. Arrearages. If yu we back child supprt r maintenance, yu will have t pay. The law requires repayment f back alimny and back child supprt thrugh a chapter 13 plan. If a plan is apprved that des nt prvide fr the repayment f back child supprt during the existence f the plan, the plan will nt be cnfirmed. In additin, wage assignments r garnishments fr child supprt r alimny cllectin will nt be stpped by the filing f bankruptcy. If a garnishment ccurs, that reduces the amunt f incme available t make the payments. If divrce payments are a prblem in yur case, please give us a cpy f the dcuments that relate t the child supprt r maintenance rder and any dcuments yu have received frm an attrney, district attrney, r ther cllectin agency. Actins affecting driver s, tradesmen s r prfessinal license due t nn-payment f family supprt are nt stpped by bankruptcy, and withhlding f tax refunds fr unpaid supprt is nt stpped by bankruptcy. CASH ADVANCES, BALANCE TRANSFERS, and RECENT CREDIT CARD USAGE. Credit card charges, cash advances, and balance transfers made n the eve f Bankruptcy filing may result in a creditr seeking a determinatin that its debt is nt discharged in the Bankruptcy. T avid that result DO NOT USE CREDIT CARD r BORROW ANY MORE MONEY. In additin, if yu have had recent (within the last 6 mnths) transactins ver $1,000 n ne accunt, cntinue making a minimal r tken (e.g. smething less than $100) mnthly payment t that creditr. UTILITY BILLS Bankruptcy discharges debts fr utilities and telephne. Hwever, the prvider may require a depsit fr future service. It is yur bligatin t wrk this ut directly with the utility cmpany. PERSONAL PROPERTY LOANS AND LEASES Recent purchases f persnal prperty that are titled by a certificate (e.g. autmbiles & mbile hmes) must be reviewed carefully fr prtectin f yur interests. If such prperty was purchased, and financed, within 90 days f the filing f bankruptcy (12 mnths, if the lender is a friend, relative, r ther insider), the lien rights f lenders must be recrded n the certificate f title within 30 days f the purchase, r the vehicle will be lst t the trustee. Keeping Prperty that is Cllateral fr a Lan: In Chapter 7, if yu wish t keep yur vehicles (r ther persnal prperty) that is cllateral fr a lan, yu must cntinue t make payments and maintain insurance. Hwever, the lender may repssess the cllateral, simply because yu have filed bankruptcy, unless yu either redeem the cllateral (pay ff the lan) r reaffirm the lan (sign a new agreement). Discuss these ptins with Mr. Hskins. In Chapter 13, if yu wish t keep yur vehicles r ther persnal prperty that are cllateral fr lans, the Chapter 13 Plan must prvide fr payments; and, yu must cmplete the Chapter 13 Plan. COMMUNICATIONS WITH CREDITORS After yu have hired us t represent yu, prvide creditrs that call with ur firm name and this phne number (except secured creditrs, e.g. hme lan r car lan). The creditr will prceed t call ur ffice fr cnfirmatin that yu will be filing a bankruptcy. A recrded message will infrm the creditr that yu have hired us t file bankruptcy. Cllectin agencies must stp cntacting yu, s lng as yu are represented by an attrney fr purpses f filing a bankruptcy. Page 9 f 10

10 COURT APPEARANCES If yu are required t respnd t a lawsuit, then yu shuld file an Answer befre the appearance date stated n the Summns r within 20 days f the date the lawsuit was received by yu, if n date is stated. If yu d nt file an Answer, yu will be in default and lse certain rights. If yu receive a subpena r cntempt citatin that requires yur appearance in curt, yu must appear, as rdered. If yu have been served with interrgatries, yu must answer them, as instructed. If yu fail t appear when rdered r answer interrgatries, the curt will issue a bench warrant fr yur arrest, and, upn arrest, place yu in jail until yu can be brught befre the judge. IF IN DOUBT, FILE AN ANSWER r ATTEND THE COURT HEARING. Nte: Yu are nt required t attend any hearing relating t freclsure n a prperty yu are giving up. CHANGE OF ADDRESS During the perid yur case is pen, and fr tw years thereafter, yu must ntify the curt in writing f any changes in yur address and/r telephne number. As part f ur service t yu, upn receipt f changed address infrmatin frm yu, we will ntify the curt. DIVORCE OR LEGAL SEPARATION Generally, we recmmend that cuples wh intend t divrce r legally separate cmplete a jint bankruptcy first; but, if husband and wife are nt filing a jint bankruptcy petitin, we recmmend that an individual bankruptcy be filed after the divrce is cmpleted. It is imprtant that yu discuss the timing f yur divrce and bankruptcy with a divrce attrney and Mr. Hskins. I hpe this has been helpful, Dave Hskins Page 10 f 10