About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Chapter 7 Bankruptcy
Written by Craig D. Robins, Esq.Some people erroneously think that they are not allowed to own any assets after filing for bankruptcy. This is not true.
The purpose behind consumer bankruptcy is to give an honest debtor the opportunity for a fresh new financial start.
The bankruptcy laws recognize that in order to get this start, you must be able to keep a reasonable amount of your possessions, such as a roof over your head, clothes on your back, and a reasonable amount of other possessions — this is all so that you can move forward with your life without becoming a ward of the state.
Various Assets are Protected by Various Bankruptcy Exemption Statutes
There are a number of laws called exemption statutes that indicate what possessions you can keep and protect. Click here to see Bankruptcy Exemptions in New York .
Wondering about keeping your clothes? You shouldn’t — Can They Take the Shirt Off My Back In a Bankruptcy Proceeding?
The exemption statute that protects your home is called the homestead exemption. Several years ago, New York increased the amount of its homestead exemption by five times — Surprise Law Enactment – Homestead Exemption Increased .
Almost all retirement accounts are protected in bankruptcy. That’s why If You’re Considering Bankruptcy, Avoid the Temptation of Borrowing From Your Retirement Account .
To learn more about pensions, see Are Pensions Protected in New York Bankruptcy Cases?
I.R.A. accounts are also protected when filing for bankruptcy. How Much Can You Protect In an Individual Retirement Account (IRA) While Filing Bankruptcy in New York?
Tax refunds are often protected in bankruptcy proceedings. To find out more if yours is, read The Issues to Consider in Determining If a Tax Refund is Protected in Bankruptcy .
Written by Craig D. Robins, Esq.Many High-income Debtors with Significant Income Can File Chapter 7 Bankruptcy and Still Pass the Means Test
During the past few years I’ve noticed a fascinating trend: I’m counseling more and more bankruptcy clients with high income and high debt.
During the past few years I’ve noticed a fascinating trend: I’m counseling more and more bankruptcy clients with high income and high debt.
Representing such debtors requires addressing certain special issues which I will focus on in this article which was originally published in the June 2010 Issue of the Suffolk Lawyer, a Bar Association periodical.
Blame the Recession
Perhaps the current drawn-out recession is affecting an increasing number of consumers beyond the low and middle-class – long the bastion of typical bankruptcy filers.
In addition, falling real estate values have wiped out the equity in many people’s homes. Many middle and upper-class Americans have thus lost their ultimate source of long-term savings.
Chapter 7 Bankruptcy Is Usually the Consumer’s Best Choice
Assuming that there’s no need to consider Chapter 13 to stop foreclosure, I always strive to file Chapter 7 bankruptcy petitions for all my clients – but doing so requires that they qualify under the means test. After all, if a Chapter 7 case goes smoothly, the debtor will discharge most or all debts and ideally keep all assets.
For high-income debtors, Chapter 7 eligibility has become rather challenging considering that under the 2005 Bankruptcy Amendment Act (BAPCPA), a consumer debtor will almost certainly face opposition to getting a discharge if he or she does not pass the means test. There is no salary cap for filing Chapter 7 Bankruptcy.
The U.S. Trustee is especially vigilant in reviewing any case that is deemed abusive, or that may even be close to being abusive.
Accordingly, analyzing the facts of a high-income debtor becomes critical and properly preparing the means test and other bankruptcy schedules becomes crucial.
How Much Income Is “High-income”?
Lately I’ve been regularly filing Chapter 7 bankruptcy petitions for families with incomes well over $100,000. I recently filed two Chapter 7 cases where the family income was over $200,000. I actually wrote a blog post a year ago entitled: Can You File Chapter 7 Bankruptcy on Long Island With a Family Income of $200,000 a Year?
Considering the perceived income limitations for seeking Chapter 7 relief under the new bankruptcy laws, such high-income filings seem difficult or impossible; yet in practice, they are not.
Generally, a high-income debtor is one who has income over $100,000 per year or $10,000 per month. In my bankruptcy practice, high-income debtors are often executives, doctors, assorted professionals, and families of double-income spouses.
General Principle for Filing High-income Cases
General Principle for Filing High-income Cases
A high-income debtor can file for Chapter 7 relief if the debtor a) passes the means test or conversely does not need to qualify for the means test; and b) passes a totality of circumstances test for filing in good faith – often meaning that all of their expenses are reasonable and necessary. See: If I Make Over $100,000 a Year, Can I Eliminate Credit Cards Debts in Bankruptcy?
Many high-income debtors also have relatively high levels of debt. A former executive previously earning several hundred thousand dollars per year can easily have as much credit card debt.
In such cases, the debt must have been incurred in good faith and must not be unreasonably high in relation to the debtor’s income at the time the debt was incurred. Counsel should devote extra time to reviewing the various debts in such cases.
The Business Debt Exception to the Means Test
Many high-income debtors have very substantial debt obligations from failed business ventures, often due to having signed a personal guarantee. A debtor is excused from preparing the means test if the debtor’s debts are not primarily “consumer debts”, and there is a box on the means test for this exclusion.
A “consumer debt” is defined as a debt incurred by an individual primarily for a personal, family or household purpose. On the other hand, some courts have defined “business debt” as debt that is incurred with a “profit motive.” I hope to devote a future column to a more involved discussion about how courts have defined debt as either business debt or consumer debt.
To see a more thorough discussion of this, please see my post: This Debtor Didn’t Have to Do the Bankruptcy Means Test .
Variables Making High-income Debtors More Eligible for Filing
Certain individuals are able to pass the means test much more easily than others. Those that have large families with multiple dependants, large mortgages, two car loans or leases, mortgage arrears and tax arrears are more likely to qualify under the means test because these items can all be used as means test deductions.
Since individuals with large famlies can benefit from increased means test deductions, consider issues in Determining Household Size for the Means Test .
Frequently, individuals with high income receive year-end bonuses. By timing the filing of the petition, the impact of year-end bonuses on the means test can be minimized or even reduced. See my prior post: Advance Planning: File Bankruptcy Before You Get a Year-End Bonus .
The Budget Must Be Reasonable
Even if the debtor passes the means test, that alone is not enough to demonstrate that the case is not abusive, and that it is filed in good faith. All budget items must be reasonable and necessary, based on the debtor’s actual income going forward. This requires a more subjective and equitable assessment of the debtor’s circumstances.
For example, the U.S. Trustee is likely to object to an expense of $2,000 per month for food for a family of four, but will not have any problem with an expense of $1,200, even though that is on the high side.
Some expenses will not pass muster. The U.S. Trustee will likely argue that an expensive summer camp is unreasonable, as sending the kids there is being done at the expense of the creditors.
Issues with Keeping Rental Property
Issues with Keeping Rental Property
High-income debtors are much more likely to have investment real estate in addition to their homes. In such cases, there is an issue as to whether keeping the rental property is reasonable. If the expenses of retaining the property exceed the amount of rental income, then keeping the property will result in a reduced amount of disposable income.
In such a case, the U.S. Trustee will argue that the debtor will have additional income each month to make payments to creditors if the investment property is abandoned.
In such a case, the U.S. Trustee will argue that the debtor will have additional income each month to make payments to creditors if the investment property is abandoned.
Maintaining a Luxury Residence
A high-income debtor is much more likely to have an expensive home. However, there are some cases across the country in which the U.S. Trustee argued that it is unreasonable for a debtor to keep a luxury home with a very high monthly mortgage at the expense of the creditors. This issue has not been addressed in our Circuit.
Alternatives If Debtor Isn’t Eligible for Chapter 7 Relief
If the debtor fails the means test or simply has too much disposable income, then there are still a number of options available. The debtor can file for Chapter 13 relief if his or her secured debts are less than $1,081,400 and unsecured debts are less than $360,475.
If the debt levels exceed these amounts, they can file for Chapter 11 relief. Debt Negotiation is also an option in which the attorney can negotiate settlements with the creditors. See my blog post: Options If You Fail the Bankruptcy Means Test .
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About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the JUNE 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Filing bankruptcy without an attorney can be extremely difficult
Written by Craig D. Robins, Esq.
When Congress changed the bankruptcy laws in 2005, they made filing for bankruptcy extremely complex and complicated.
The fact is that is it is extremely difficult to file for bankruptcy without an attorney.
Recent figures indicate that about nine out of ten self-prepared bankruptcy petitions are dismissed because the “pro-se” debtors did not properly fulfill their obligations under the new bankruptcy laws. “Pro-se” is the Latin legal term for someone who is representing himself or herself without a lawyer.
Filing Bankruptcy on Long Island without an attorney is further complicated because in addition to attending to obligations under the federal bankruptcy laws, you must also adhere to the Local Bankruptcy Rules for the Eastern District of New York.
Representing Yourself in Bankruptcy is Often A Mistake
Filing for bankruptcy is much more involved than reading a “How to File Bankruptcy” book. It takes a keen understanding of federal and state law.
Many debtors who represent themselves are not aware of what assets they can protect, and what assets they cannot protect. I have seen many a case where the trustee has taken assets from a pro-se debtor because they were not exempt and protected.
The Means Test Can Be Very Complicated
Every person filing bankruptcy must complete the means test and must do so properly. If the means test is not prepared the right way, it can constitute grounds for the Bankruptcy Court to dismiss your case.
The means test is one of the most involved and controversial aspects of filing bankruptcy today. See: Deciphering the Plethora of Means Test Cases Across Many Bankruptcy Courts.
Click here to see a variety of articles about the bankruptcy means test.
Documents Must Be Filed with the Court and Provided to the Trustee
The new laws also require that a debtor provide a number of documents to the trustee in a timely fashion. I have observed that with a great number of pro-se Chapter 7 filings, the trustees have refused to examine the debtor because the debtor failed to provide the proper documents.
In addition, I have never, ever seen a Chapter 13 pro-se debtor who provided all of the necessary documents to the Chapter 13 trustee when they were required to do so.
Finally, if you do not file other mandatory documents with the court on a timely basis, the court will dismiss your case.
You Must Know What Information Must be Provided in the Bankruptcy Petition
The petition, itself, is rather complicated. With most of the cases we file, the petition is close to 50 pages long.
You must also understand what particulars about your financial situation to include. For example, What Income Has to be Disclosed in a Bankruptcy Petition?
Retaining an Experienced Bankruptcy Attorney is a Wise Investment
An experienced bankruptcy attorney will know how to quickly and efficiently put together your petition, file your case in the proper way, and then represent you in Court.
When it comes to seeking to eliminate a substantial amount of debt, it makes sense to do it the right way. Many experienced bankruptcy attorneys, such as my Long Island Bankruptcy Law Office, offer free consultations.
Please see the much more detailed article I wrote last year: Bankruptcy Attorney Representation — How Important Is It?
Written by Craig D. Robins, Esq.A person’s house is usually their most valuable asset. Understandably, one of the first questions my homeowner-clients ask me is “How will filing bankruptcy affect my home?”
Foreclosures and Collections Are Stopped Cold
The first thing you should know is that as soon as your petition is filed, the automatic bankruptcy stay kicks in.
This means that if you were behind with your mortgage, it now becomes against federal law for the mortgagee to continue any foreclosure proceeding.
If the House is Exempt, There Is No Problem Keeping It
Every state has a homestead exemption statute that sets forth how much equity you can keep in your home, while eliminating debts in a Chapter 7 bankruptcy case. In some states, the homestead exemption is based on federal law.
In New York, the homestead exemption is $50,000 per person. This is based on New York State law. See: Bankruptcy Exemptions in New York .
A husband and wife who file jointly can pool that homestead exemption and protect a total of $100,000 worth of equity. Sometimes Bankruptcy Exemptions Can Be Doubled .
If the House Has a Great Deal of Equity, You Can Still Keep It
Even if there is more than $50,000 of equity per person, then you can still keep you house if you file a Chapter 13 payment plan bankruptcy.
In such cases, the total amount you will have to pay back to your creditors through the plan, which is usually over a period of 60 months, must be at least equal to the amount of unprotected equity.
Sometimes deciding whether to keep a home or not can be a difficult decision.
If You Can’t Afford Your Mortgage or You Do Not Want to Continue Paying Your Mortgage You Can Walk Away (Eventually)
If you can no longer afford to keep your home and you have little or no equity in the home, then you may want to file for Chapter 7 bankruptcy in which case you can walk away from your obligation without any financial recourse from the lender. See: Strategic Mortgage Defaults Increasing .
In such cases, the lender still has the right to eventually foreclose on the home and take it back, but that can take an extended period of time during which you can continue to reside in the house without making any payments. Bankruptcy Can Provide Way Out of Bad, Highly-Leveraged Real Estate.
When the lender eventually does take the property back, it cannot pursue you for any deficiency amount. This is because the bankruptcy had the effect of discharging that debt. One-Fourth of All U.S. Homeowners Are Underwater. What Should These Homeowners Do?
Filing for Chapter 7 When There Is Substantial Unprotected Equity in the House
It is extremely rare that we recommend to a bankruptcy client that they file for Chapter 7 bankruptcy if they have a great deal of unprotected equity in their home. Usually we recommend that they try to sell their home first.
However, we do see situations in bankruptcy court where a homeowner with substantial equity files for bankruptcy. In such cases, the Chapter 7 trustee will seek to sell the home. However, the trustee must pay the debtor the amount of the homestead exemption from the proceeds, which would be $50,000 per person.
If You Have Real Estate and Need Bankruptcy Relief, You Should Consult With Experienced Bankruptcy Counsel
Protecting real estate in bankruptcy can be tricky and must be done the right way. When it comes to houses and homes, there are often many options when dealing with problematic debt situations.
It therefore makes sense to consult with a qualified and experienced Long Island bankruptcy attorney.
Written by Craig D. Robins, Esq.Chapter 7 bankruptcy is designed to enable an honest consumer to get a fresh new financial start. This is done by permitting the consumer to permanently eliminate or “discharge” most debts.
The Most Common Debts That Are Dischargeable Include:
• Credit Card Debts
• Personal Loans
• Medical Bills
• Utility Bills
• Checking Account Overdrafts
• Certain Income Tax Debts Older Than Three Years
The Most Common Debts that Can’t Be Eliminated in Bankruptcy Include:
• Alimony and Child Support Obligations
• Most Recent Tax Debts
• Most Student Loans
• Debts Owed to Governmental Units (Traffic Tickets and Fines)
• Debts for Willful or Malicious Injury
• Debts Incurred While Driving a Vehicle When Intoxicated
• Debts Incurred Through Fraud or False Pretenses
• Criminal Restitution
What Happens to Non-Dischargeable Debts?
Those debts that are non-dischargeable will survive the bankruptcy. However, with most non-dischargeable debts, the creditor is precluded from collecting them during the pendency of the bankruptcy proceeding, which usually lasts several months.
What About Discharging Taxes in Bankruptcy?
Certain income tax debts can be eliminated in a Chapter 7 bankruptcy case. However, there are several multi-prong tests for determining whether a tax debt can be discharged. For a complete discussion, see Eliminating Taxes in Bankruptcy .
Don’t Be Greedy — Using Credit Cards After Deciding to File Bankruptcy Can Cause Big Trouble
Once you decide to seek bankruptcy relief, do not use your credit cards any further. Doing demonstrates bad faith and can make all of your debts non-dischargeable. See: Big No-No: Using Credit Cards After You’ve Decided to File Bankruptcy.
Written by Craig D. Robins, Esq.
I am currently in San Francisco where I just attended the annual convention of the National Association of Consumer Bankruptcy Attorneys (NACBA). I write this report from there on May 1, 2010.
[Note: this article was previously published in the May 2010 edition of the Suffolk Lawyer].
[I will soon post a number of photos that I took at the NACBA convention}
Many years ago I discovered how exciting it is to travel across the country to interact with fellow bankruptcy practitioners and learn the latest about strategies for protecting consumer bankruptcy debtors, and tips for running a bankruptcy law office.
Over the course of three days, some of the country’s leading bankruptcy attorneys as well as a number of bankruptcy judges, provide valuable insight at daily programs and seminars.
What I find just as important is trading notes and war stories with other bankruptcy attorneys from across the country and learning about new products and services at the accompanying trade show.
Here Are Some Highlights of the Bankruptcy Convention
New Trend in Interpreting the Means Test
In a half-day program which addressed the means test, the speakers concluded that both the United States Trustee and our country’s bankruptcy judges have become more lenient in interpreting the means test in Chapter 7 cases. There are three reasons for this trend.
Apparently, the current recessionary climate and sentiment against large banking institutions is resulting in the U.S. Trustee bringing fewer Section 707 motions alleging that the debtor filed an abusive case.
In addition, more and more debtors are providing information to the U.S. Trustee’s office in cases where there are means test issues. This enables the U.S. Trustee to evaluate the issue of abuse and reach a conclusion that the U.S. Trustee should not object.
Finally, there seems to be a greater number of experienced bankruptcy attorneys who know what red flags to look out for and consequently these experienced attorneys refrain from filing abusive cases.
Wide-Spread Concern Over Bankruptcy Judge Salaries
Judicial salaries are relatively low. It appears that we are losing a large number of bankruptcy judges because the level of judicial pay is so low. When there is a vacancy on the bench, this causes the bankruptcy court’s entire case load to slow down, which means unhappiness and dissatisfaction to litigants and all others involved.
This was indeed the case just two three years ago here, in the Eastern District of New York. Our Chief Bankruptcy Judge for the district, Hon. Melanie L. Cyganowski, left the bench to pursue a much more profitable position as a partner in a leading bankruptcy firm.
I interviewed Judge Cyganowski at that time and she clearly indicated that her reason for leaving the bench was because of her unreasonably low judicial salary. See: Chief Bankruptcy Judge Melanie Cyganowski Stepping Down.
HAMP Bankruptcy Update
There was ample discussion about President Obama’s Home Affordable Modification Program (HAMP) which seems to be rife with problems as an unusually small percentage of homeowners actually get permanent relief.
Here’s why:
a) there is a major lack of communication on the part of the lender;
b) lenders are continuing to threaten homeowners with foreclosure even as the lender is evaluating the homeowner for a modification, and even if the homeowner has been approved for a trial term; and
c) lenders are arbitrary in granting relief.
On a positive note, however, a new law is going into effect on June 1, 2010 that, among other things, makes it illegal for a lender to discriminate against a bankruptcy debtor because he or she is in the HAMP program.
The new law will also provide certain protections to Chapter 13 debtors as mortgagees will be precluded from objecting to discharge.
Lower Prices for Credit Counseling
When the 2005 Bankruptcy Amendment Act first went into effect in 2005, there were only four approved credit counseling agencies in our jurisdiction (E.D.N.Y.), and they all charged the same rate – $50 per credit counseling session.
There must have been about 20 credit counseling companies exhibiting at the trade show and many now charge fees as low as $15 per session.
In addition, they gave out so much shwag that my ten-year-old son, Max, will be delighted to receive from me upon my return a large number of squeeze toys, flashlights, keychains, fancy chocolates, playing cards, puzzles, T-shirts and what-not that I picked up from these exhibitors.
My hard-working office staff will also be the recipient of a good deal of this booty.
Emerging Technologies for Consumer Bankruptcy Practices
One of the most crowded exhibitor booths belonged to a OTB, an company that created BK Express, a comprehensive practice management system which is designed for consumer bankruptcy attorneys.
I actually just set up my office to use this software which is basically a special shell designed to work on top of LexisNexis’s Time Matters system.
Problems with MERS Mortgages and Foreclosure Defenses
In a very dynamic session, we were told that 50% of all residential mortgages in this country are nominally owned by MERS, which is Mortgage Electronic Registration Systems, a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States.
The problem with MERS-recorded mortgages is that MERS really does not own the mortgage, thereby creating an interesting argument that MERS does not have any standing in bankruptcy court.
I previously wrote about special defenses that a homeowner can assert to defend a foreclosure action involving a MERS mortgage. See: A New Powerful Mortgage Foreclosure Defense — Compliments of MERS.
If your client has a MERS mortgage, consider looking at the pooling and service agreement to make sure that there was a true and valid assignment at every link of the chain, including delivery and acceptance of assignment documents. If there was not, you may have a good objection to a MERS proof of claim or motion to lift the stay.
Few Bankruptcy Attorneys From New York
I was rather surprised the very small turn-out from our state. Out of about 1,600 bankruptcy attorneys who attended the convention, there must have been fewer than 20 from New York, and only one other member, I believe, from the Suffolk County Bar Association. That was Allison Shields, who was actually one of the speakers – she spoke on managing a successful bankruptcy practice.
Can a Chapter 7 Discharge Be Revoked?
Posted on
Written by Craig D. Robins, Esq.In a typical Chapter 7 bankruptcy case, the debtor is able to discharge most debts. Dischargeable debts include credit card debts, personal loans and medical bills. Some debts are non-dischargeable such as most taxes and student loans.
In most Chapter 7 cases, the court grants the debtor a discharge about four months after the case is filed.
However, if a debtor engages in certain improper conduct, the bankruptcy court can revoke the debtor’s discharge.
For example, if the Chapter 7 trustee leans that the debtor obtained the discharge fraudulently by lying about material facts in the petition or by failing to disclose assets, then the trustee can bring this to the attention of the court and ask that the debtor’s discharge be revoked.
Other grounds for revoking the debtor’s discharge include failing to cooperate with the trustee.
Generally, an application to revoke the debtor’s discharge must be brought within one year of the date of discharge.
Debtors should be aware that receiving a discharge is not an excuse for refusing to cooperate with a trustee
I currently have a recalcitrant client who was directed by the trustee to turn over the tax refund which was not exempt.
Before the debtor received his tax refund, the court granted him the discharge. The debtor then contacted me saying that since he received his discharge, he was not going to cooperate with the trustee.
This debtor is sadly mistaken. If he does not turn over the tax refund to the trustee, it is just a question of time before the trustee brings a motion to revoke the debtor’s discharge. — and the trustee will prevail since the debtor is demonstrating bad faith.
If the debtor fails to cooperate with the trustee by refusing to turn over assets of the estate, then the trustee will often bring a motion against the debtor seeking to vacate the debtor’s discharge.
Written by Craig D. Robins, Esq.We all know that as part of the Bankruptcy Amendment Act, debtors are audited from time to time to make sure that they are providing accurate information to the court (see: Random Audits of Consumer Debtors).
Most people aren’t aware that Chapter 7 panel trustees are audited as well, but for different reasons.
There Are About 1,100 Chapter 7 Trustees Across the Country
In our district, which is the Eastern District of New York, there are 20 Chapter 7 trustees. That breaks down into nine who receive cases in the Central Islip Bankruptcy Court (see: Long Island Chapter 7 Bankruptcy Trustees ) and eleven who receive cases in the Brooklyn Bankruptcy Court (see: Brooklyn Chapter 7 Bankruptcy Trustees ).
How Chapter 7 Panel Trustees Are Audited
The Executive Office forthe United States Trustee engages in full audits, field exams, trustee interim reports and performance reviews as part of its program to measure a trustee’s compliance with his or her fiduciary duties and other obligations under the U.S. Trustee program.
Chapter 7 panel trustees are fully audited at least once every eight years by an independent Certified Public Accountant.
Every four years, a staff person from the U.S. Trustee’s office conducts a field exam.
All trustees must submit regularly to a trustee interim report.
In addition, the Office of the U.S. Trustee evaluates each panel trustee every two years.
What Are the Most Common Findings in Audits of Chapter 7 Trustees?
The most common finding based on audits is that the trustee was not careful enough in reporting information about assets on a particular form that the trustee is required to file.
Findings that can lead to an “inadequate” opinion include not timely investigating or liquidating assets, failing to supervise support staff, and co-mingling bankruptcy estate funds with non-estate funds.
What Happens if the Chapter 7 Trustee is “Inadequate”?
The U.S. Trustee has determined that some findings are so important that if an auditor uncovers them, the trustee will be given an “inadequate” audit opinion.
This usually happens when the auditor determines that the Chapter 7 trustee accounting and cash management practices are insufficient for safeguarding any funds the trustee is holding on behalf of a bankruptcy estate.
If a Trustee receives an “inadequate” opinion, the trustee gets suspended from the active rotation of receiving new cases.
Written by Craig D. Robins, Esq.Most consumers who file for bankruptcy will likely never see who their bankruptcy court judge is.
Interaction with the bankruptcy judge is very limited in most cases.
Chapter 7 Cases
In a Chapter 7 case, the debtor meets with the Chapter 7 trustee, and it is the trustee who asks the debtor questions.
The debtor will not go before the actual judge unless there is some kind of motion or dispute that requires the debtor’s appearance, and in Chapter 7 cases, that is very unlikely.
Chapter 13 Cases
Chapter 13 trustees also examine debtors. Remember, it is the trustee who interviews the debtor and it is the bankruptcy judge who settles disputes between parties (the debtor, the creditors and the trustee).
A Chapter 13 debtor is more likely to appear before the judge, but typically, that is just for the confirmation hearing which is when the bankruptcy judge formally approves the debtor’s Chapter 13 payment plan.
Furthermore, if you’re fortunate, and you and your attorney do everything that the Chapter 13 trustee requires, then the trustee may waive your appearance at the confirmation hearing.
When Might You Meet Your Bankruptcy Judge?
If you fail to cooperate with the trustee by providing documents or information, then the trustee can bring a motion to dismiss the case, in which event you will probably end up having to go before the judge.
In a Chapter 13 case, if you fall behind with your obligations, such as making payments to the trustee or mortgagee, and one of them brings a motion to dismiss your case or lift the stay, then you will also probably have to go before the bankruptcy judge.
But one thing is certain, you will never meet your bankruptcy judge at the meeting of creditors because Bankruptcy Judges Are Barred by Law From Attending the Meeting of Creditors .
Written by Craig D. Robins, Esq.When you file for bankruptcy relief, a very powerful federal law immediately goes into effect, called the automatic stay. This is the law which makes it illegal for creditors to take any action of any kind to collect a debt. This is how you get debt relief when you file for bankruptcy.
It is against federal law for creditors to violate the stay. This means that any litigation comes to a grinding halt. However, in certain situations, creditors have the right to ask to bankruptcy court to “lift the stay” which is done in a “motion for relief” from the stay.
Under What Circumstances Do Creditors Bring Motions to Lift the Bankruptcy Stay?
Motions for relief are often brought by mortgage companies and lenders when a homeowner files for Chapter 7 bankruptcy relief and is behind on the mortgage.
Automobile lenders also bring such motions when debtors are in arrears on car loans.
In Chapter 13 bankruptcy cases, lenders bring such motions when the debtor fails to stay current with post-petition obligations.
If the Court grants a motion for relief, it enables the creditor to continue where it left off in its efforts to collect on a debt or foreclose on a house.
Creditors must bring a motion to lift the stay and be granted relief before engaging in any further collection activity. If they do not, then they can be severely penalized. See: What Are Your Rights If a Creditor Violates the Automatic Bankruptcy Stay?
When Are Motions For Relief Brought In Typical Consumer Bankruptcy Cases?
Although some creditors will rush to file a motion for relief from stay within days of the bankruptcy filing, most creditors do not act that fast.
In a typical Chapter 7 case, even if the debtor is extremely behind with mortgage or car loan payments, it will often take the lender 30 to 60 days before bringing such a motion.
How Long Does It Take for the Bankruptcy Court to Grant Relief from the Stay?
Once a motion for relief is brought, the debtor must be given the opportunity to defend the motion. Thus, the hearing on the motion will usually not occur until several weeks after the motion is brought.
If the debtor does not defend the motion, which is usually the case, the court will grant the motion. However, some bankruptcy court judges will not sign the order lifting the stay until the creditor serves (”settles”) a proposed copy of the order on the debtor and the debtor’s attorney.
Creditors Held to Strict Requirements When Bringing Motions for Relief from Stay
Most bankruptcy courts, including ours on Long Island, have stiff rules that creditors must adhere to when bringing a motion for relief. If they do not, the Court will either dismiss the motion or adjourn the hearing.
Up until recently, most creditors had a much easier time of bringing motions for relief, as many bankruptcy judges permitted them to do this on a “Notice of Presentment” — a method of getting the order granting the motion without having to show up in court if the debtor didn’t put in a defense.
However, most bankruptcy court judges in our jurisdiction have begun to require creditors to show up in court on motions for relief, and no longer permit them to seek relief through a Notice of Presentment.
Defending Motions for Relief from Stay
I wrote a lengthy article about this five years ago — Defending Motions to Lift the Stay . Almost all of the principals that I discussed in that article still apply.