Kentucky Bankruptcy Law

Counsel with Care

What your bank CAN and CANNOT do when you file bankruptcy

I make it a habit to advise clients to move their bank accounts prior to filing a Chapter 7 or Chapter 13 if they also owe a debt to their current institution. This is especially true if they bank with a credit unition. The reason is that there are some actions the bank or credit union can take that will make a debtor’s life difficult. These are legal restrictions of services and NOT a vioaltionof the automatic stay that a bankruptcy provides. The In re Spearman (W.D. Ky 2017) makes this very clear.

A bank or credit union likely will have a policy that allows them to stop providing certain services to customer if the customer files bankruptcy or otherwise negatively impacts the bank through their actions. The most common service that makes life difficult is the cessation of any electronic access to the debtor’s accounts. This means no online access to statements or to view their accounts. It also means no more use of a debit card at a store, restaurant, ATM, etc.

What a bank or credit union cannot do is deny access to the funds in your account. If there is money in a checking or savings account, they have to give it to you. They have to honor checks written on that account (so long as funds are available) and they have to let you show up in person and withdraw funds. They must tell you what is in your account if you come to a branch.

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April 17, 2017 Posted by | Uncategorized | 1 Comment

Tax Time!

Are you dreading writing a significantly sized checks to the state and Federal governments soon? Or, perhaps you a excited about the refund you are getting and what you plan to do with it. Either way, here are a couple brief bullet points of things to be aware of if you are also facing a potential bankruptcy:

  • Avoid the temptation to NOT file your return. It really just delays the inevitable and there are some time limits that do not start to run until you have filed. If you may need to get a discharge on tax debt in a few years because it is mounting up, filing early and owing the IRS (or Kentucky) is better than waiting so that the debt actually can be discharged later on. If you use an accountant, though, be sure to check with them as well since there may be other considerations.
  • Paying a lump sum of over $600 from that refund to any one creditor within 90 days of filing a bankruptcy creates a “preferential payment” that the trustee can go after. So, it may be just throwing money away and making the bankruptcy drag out longer. If that lump sum will actually solve your financial woes, then go for it.

April 14, 2017 Posted by | Uncategorized | Leave a comment

Interest Rates on Secured Claims in Chapter 13 Cases in the EDKY

Tremendously valuable information.

Based on experience, not only is the interest on Federal past due taxes lower, but they are also easier to deal with.

Chapter 13 Trustee, EDKY: Trustee's Blog

The prime rate of interest increased a quarter of a point to 4% effective March 16, 2017.  Read on for information on how this affects chapter 13 plans in the EDKY, and what other interest rates are applicable to secured claims.

Prime rate:

Generally the interest rate on secured claims being paid through a chapter 13 plan is prime plus a risk factor of 1 to 3 points.  We often refer to this as the Till rate, named after the 2004 Supreme Court opinion which advanced the formulaic “prime plus” method of setting interest rates in chapter 13 cases.

The plan in the EDKY sets forth a “default” interest rate of the Wall Street Journal (WSJ) prime rate on the date of confirmation plus 2 percentage points.  Thus, for secured claims that are not specifically provided for in the plan, or for those secured claims that are provided for…

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April 7, 2017 Posted by | Uncategorized | Leave a comment