Kentucky Bankruptcy Law

Counsel with Care

Matching the Competition? How about going beyond!

I have written about this before, but it bears repeating. I am not offering smoke and mirrors here, but just straight up information. There is a competitor’s ad campaign that has garnered considerable attention and it promises to get a bankruptcy started for $78.00. The ad goes on to note that certain restrictions and qualifications apply to this offer. And, I am sure they do explain those once your come in to meet with them. I have not interviewed my competitors on this issue, so I cannot say with certainty, but I can only contemplate one way that they can actually get a bankruptcy started for $78.00 and that is in a Chapter 13. It just so happens that you can pay the $310.00 filing fee that the court charges for a Chapter 13 (or the $335.00 for a Chapter 7) in four monthly installments. Each installment for the Chapter 13 would be $77.50 and thus we have you entering into a Chapter 13 paying only that first installment (and rounding it up gives you the $78).

I can do this for you also. However, I would need to figure out how much of a plan payment you would be able to afford because paying payments each month makes up a Chapter 13 in contrast to a Chapter 7. That would be the restriction. The Chapter 13 can run as short as 36 months or as long as 60 months depending on your household income. Attorney fees run higher in a 13 than a 7 but those higher fees can be paid through the plan itself. I only recommend going this route if it is the only way you can get into a bankruptcy and get the relief you need. You must qualify for a Chapter 13 which includes having a regular source of income and that income must be sufficient to pay enough in a plan payment to cover the attorney fees, trustee commission, certain tax debts, and certain secured debt arrears. The hitch with going this route is that the less your pay up front on attorney fees, the higher the plan payment has to be after filing. That may be perfectly fine and work well, I just want you to know that in advance rather than when I have you already in my office. There is also a credit counseling course that must be done through a third party prior to filing and this can run anywhere from $10 to $25 directly to that company. This a legal requirement of the law and not something that can be circumvented.

How would I be able to go beyond a firm that can get you into a bankruptcy for $78.00?  Well, I do all the work myself. From the initial phone call to the initial meeting all the way through to the discharge order being issued at the end of the bankruptcy – it is all with me personally. That is to say, you will not be interacting with secretaries, paralegals or other attorneys (unless there is a true emergency); you will be interacting with me. I will be the familiar face that shows up with you at the meeting of creditors and the same voice on the phone who helps explain things along the way. That is simply how I chose to practice law, by keeping overhead low and doing it myself rather than shooting for high volume. That competitor does a fine job from what I can tell; it just done using lots of staff. If my individualized and personal approach appeals to you, then come in to see me and I will see if I can match any competitors’ offer for a bankruptcy or even go beyond what they have to offer. There is no charge for that initial consultation and I do NOT limit it to 1/2 an hour.

Advertisements

May 29, 2015 Posted by | Alternate Debt Relief, attorney fees, Bankruptcy, Chapter 13, Chapter 7, consumer bankruptcy, consumer debt, Credit Counseling & Debtor Education, Discharge | , , , , , , , , | Leave a comment

Concurrent Jurisdiction of State and Bankruptcy Courts

There is a nice little Kentucky Supreme Court opinion called Howard v Howard, 336 S.W.3d 433 (Ky. 2011) every Kentucky family lawyer and consumer bankruptcy lawyer should read. The first part of the opinion addresses child support and contempt sanctions, which to be sure are fun things to know about, but the meat of the opinion spells out the concurrent jurisdiction of Kentucky Courts with the Federal Bankruptcy Courts and how that effects discharge of certain kinds of debt.

Under 28 U.S.C. Sect. 1334(b), a state court has the same and concurrent jurisdiction as a bankruptcy court to make a determination as to whether a particular debt is discharged by a bankruptcy. In the Howard case, the ex-husband had agreed to be responsible for certain debts the ex-wife had also co-signed. However, he went into a Chapter 7 and received a discharge of that debt. Even though the ex-wife had notice of the bankruptcy and did NOT file any objection in the Chapter 7, she was still able to go to the Kentucky Circuit Court where the divorce had occurred and get a ruling that ex-husband still owed the obligation to her.

You see, the divorce decree created an obligation between the ex-husband and ex-wife even though a third party was the direct creditor. This obligation was found to be an 11 U.S.C. Sect. 523(a)(15) obligation as a result of a divorce. Therefore, by operation of that law, that obligation to the ex-wife was not touched by the bankruptcy. When the original creditor came back to collect from the ex-wife, she was able to pursue contempt against the ex-husband and win. This saved ex-wife from having to pay for a lawyer in the bankruptcy in addition to paying for a lawyer in the Circuit Court case.

February 7, 2015 Posted by | attorney fees, Bankruptcy, Chapter 7, child support, Civil Procedure | , , , , , , , , , , | Leave a comment

Keeping the Homestead Safe in Bankruptcy: Chapter 13

Bankruptcy continues to evoke this notion of getting something for nothing. For some,that results in feeling a bit of judgment or disdain towards the whole idea of filing bankruptcy or the people who end up there. To that I say, “There, only by the grace of God go I”. Others see it with a bit of a glimmer in their eye as a great way to get free stuff. Both views are askew. Bankruptcy is a tough process to go through that is humbling and often anxiety provoking which is why people prefer to hire a lawyer than attempt it pro se. Few people actually abuse the system; most who file have tried everything they could think of to avoid it, but life’s curve balls and the accumulation of mistakes here and there just prove too daunting without assistance. For those hard working folks who end up in a bad spot, I do what I can to make the process smooth and effective so they can get on rebuilding their lives financially.

One of the things I do to ease the way is to stress the imperative in Chapter 13 bankruptcies that if you want to keep it, you must pay for it. This applies to bigger ticket items with a loan secured against it like a house or a car. Many people opt for a Chapter 13 because they fell behind in their house payments or their car payments but they do not want to lose that property. Well, a Chapter 13 can certainly make that happen, but they must still pay for the house or the car. There are NO free houses out there – and the only free cars are ones your would not want to drive.

Chapter 13 only halts the secured lenders collection process (and helps reduce interest costs in certain ways). That means that foreclosure proceedings for a house are stopped and repossession of a car is nixed. Then, the arrears that had accumulated must still be paid through the Chapter 13 plan payments as well as each ongoing payment as it comes due. Unfortunately, many home owners had the pre-bankruptcy experience of months going by without making house payments before the bank took legal action. That will NOT be the experience in the bankruptcy. The secured lenders are much quicker to file a Motion for Relief from the Stay (the automatic collection halting part of a bankruptcy). This motion allows them to then resume the foreclosure in state court if it is granted.

Often, this motion is filed by the lender quickly after a payment or two is missed as a wake-up call to the debtor. They really just want the debtor to get caught up on their payments and so they typically will enter into an agreed order with the debtor to do just that over the next few months rather than force their motion through. However, this is an exceedingly expensive process. The lenders insist on getting reimbursed for the hundreds of dollars they spent on an attorney and filing fees for that motion. So, you may have used that $1,000.00 house payment or two to buy Christmas gifts or cover an unexpected medical bill, but you will end up eating around $600 or $700 on top of catching up those missed payments.

To make it through your Chapter 13 smoothly and retain your house and car, those payment simply have to be a non-negotiable. There is no wiggle room on secured debt payments in a Chapter 13. If you want to keep it, you must pay for it.

December 19, 2014 Posted by | Additional Debt, attorney fees, Automatic Stay, Bankruptcy, Chapter 13, consumer debt | , , , , , , , , , , , , | 1 Comment

The scoop on the $71.00 bankruptcy ad

I posted awhile ago about a neighboring high-volume bankruptcy firms TV advertisements to “get your bankruptcy started for just $71.00”. I speculated on how they did that, but I have since learned what the deal is from a client who went to them first. She clearly was a candidate for a Chapter 7: below median income, no secured debt arrears, no priority debt, and nothing else that would lend itself to Chapter 13. However, she could not come up with the attorney fees to do the Chapter 7 right then. So, they offered to put her into a Chapter 13 with just $71.00 up front.

This seems like an acceptable approach. Basically the attorney is using the ability to have their fees paid through the Chapter 13 as administrative expenses. The up side for the debtor is that they get the relief from creditors including garnishment right away. The downside is that this is a much more expensive and involved process than the Chapter 7. Debtors need to be made aware of how much more they would pay in the long run for the Chapter 13 as compared to the Chapter 7 – sort of fair credit act kind of disclosure. Perhaps my colleague is giving that kind of disclosure – I have no reason to doubt that they are. If so, then I give them props for giving another option for debtors that needs relief from debt right away, but whom cannot afford the attorney fees.

May 28, 2014 Posted by | attorney fees, Bankruptcy, Chapter 13, Plan | , , , , , , , , , , | Leave a comment

Taxes & Bankruptcy

I write about this every year because it is a recurring issue for people facing bankruptcy. Taxes have a bearing on bankruptcy whether you are owed a refund or whether you owe the IRS. Therefore, they must always be taken into account, but it is especially important during this first handful of months each year.

The first thing to remember is that if you are owed a refund at the time of filing, that refund is an asset of the estate and must be reported in Schedule B and hopefully exempted in Schedule C. If you owe taxes, they are reported on either Schedule F or E depending on whether they are priority debts or not. Your attorney can help sort that out. Tax debt and tax refunds arise on December 31st each year. So, if you file a bankruptcy on January 1st, then you must account for the tax situation that arose from just the day before. So, even if you do not file your tax return until April 15th (or October if you file an extension) you either owe taxes for the year that just ended or you are getting a refund (rare indeed is the person who lands right at zero, but I suppose it happens).

If you owe taxes for the preceding year, they will be considered a “priority” debt and a debt that cannot be discharged. In a Chapter 7, the IRS and any state agency you owe taxes to will begin collection activity after your Chapter 7 is closed. In a Chapter 13, you will have to make sure you pay enough into the plan for those taxes to be paid in full over the life of the Chapter 13 along with 4% interest for federal income taxes and 5% interest on Kentucky income taxes.

If you are owed a refund, you need to report the refund as accurately as possible in your schedules of assets. This means you will likely have to run at least a rough draft of your tax return to get a good faith estimate of what is due back to you. Then, you will attempt to cover the entire amount in “wild card” exemptions. If you cannot exempt the entire amount, you will need to make a determination with help from your attorney as to whether you should wait until you receive the refund or press on.

If you decide to wait until you receive the refund, then the smart thing to do would be to pay for the bankruptcy and spend the money on necessities, such as food or needed repairs to you car. Do NOT use it to pay unsecured debt, especially not to relatives. Your attorney can help you know how much you can hold onto and exempt.

Your attorney can also help you determine if older income tax debts, such as those that arose a few years prior to the bankruptcy, will be discharged in your Chapter 7 or 13. All of this is acceptable pre-petition planning to make the most of the fresh start bankruptcy allows.

December 27, 2013 Posted by | attorney fees, Bankruptcy, Chapter 13, Chapter 7, Plan, Tax Debts, Tax refund, The estate | , , , , , , , , , , | Leave a comment

The Scoop on the $71.00 Bankruptcy

I saw a TV ad yesterday afternoon by a law firm that does a high volume of bankruptcy filings. I had just finished a five-hour evidentiary hearing and so I took off a little early to refuel. Those evidentiary hearings require tremendous and sustained concentration.  Anyway, this ad surprised me. The attorneys at the firm stated in the commercial that they knew how tight people’s budgets were so they would “get started with your bankruptcy for only $71.00.” I got out my calculator and started crunching numbers to see how they could stay in business.

You see, that law firm has a high overhead. They spend thousands and thousands every month in television commercials and billboards. They also utilize paralegals and support staff to prepare petitions and other necessary documents to file a bankruptcy. They have a nice, decent sized building in a strategic main thoroughfare. And, of course the attorneys want to make a decent living also. All that adds up to high overhead costs that have to be covered somewhere.

In my situation, I do all the work myself and so I have no support staff. My partner and I have a reasonable lease on a 200-year-old “mansion” (a.k.a. farmhouse) in the middle of a subdivision. Our advertising budget… well, this is it. You are looking at it. Sure, I also want to make a decent living, but still this all adds up to very low overhead and this gets passed on to you.

So, basic math dictates that the big law firm must make much more money than the small law firm. They are either charging more for each case than I do, they are cutting costs somewhere, or both. I cannot say anything more specifically about that law firm because I do not know more. I can say that, in general, businesses that do volume business build in costs reduction by standardizing everything. Think McDonald’s.

So, how can they advertise this $71.00 deal? Go back to McDonald’s and think dollar menu. The dollar menu offers a very low-cost option that is small and bare bones. But, that still does not explain it all. True, they are likely basing that $71.00 on their most basic services in the simplest of Chapter 7s. And, that still cannot possibly be done for $71.00. So, the key is in the phrase “get started for….” Lawyers know to listen for such phrases, but the general population over skips over them. This is how marketing is so effective.

Easy enough. I do free consults already and then I typically ask for $200.00 to be paid into escrow before I actually am “retained”. This means that I will then take creditor calls when necessary, you can tell creditors to leave you alone and contact me, and I will complete the means test. I suspect that for $71.00, they will only have their paralegal gather paper work and perhaps even do a rudimentary means test, but then they will work out a payment plan for the rest. Well, I will match that. I will even beat it. For $70.00 I would also be willing to gather your paper work and do a means test. Then, we can make a plan for the rest, but I will not be able to deal with creditors for you. Just mention this blog post for this special offer.

Do not be fooled, though – the $71.00 (or my $70.00 offer), will NOT get you a bankruptcy. It just gets things started. You will have to come up with several hundred dollars prior to filing for attorney fees whether you come to me or go to the firm with the advertising. Fees not paid prior to filing a Chapter 7 would be a debt owed in the bankruptcy and discharged just like every other debt. The difference to consider: my partner and I actually do all the work ourselves and ensure high quality of work.

December 11, 2013 Posted by | attorney fees, Bankruptcy, Chapter 13, Planning | , , , , , , , | 1 Comment

What’s with these Chapter 13 attorney fees?

I was wrapping up final preparations on a Chapter 13 petition and proposed plan today for filing next week. As I ran through the plan and made provisions for the adequate protection payments (in this region they are typically 1% of the value of depreciating assets), I realized it would be some time before I began getting paid for my work. You see, in a Chapter 13, one can put much of the attorney fees into the plan to be paid as administrative costs. This is a priority class of creditors that can be paid in full through the course of the plan. As a priority class, that also means they can be paid ahead of many other kinds of debt.

However, they do not get paid ahead of adequate protection payments. I had been very diligent in this person’s plan to make their budget workable so they could keep their family running while still saving their house and paying off the family car. That car, a family vehicle worth over $10k, meant that adequate protection payments would be over $100 per month right out of the gate. However, due to repaying some retirement plan debts (allowed to avoid tax penalties) their first several months of plan payments would not be much more than the adequate protection amount.

I breathed a sigh and reassured myself that it was just a matter of time and I would be compensated for the post-petition work. I felt good that I was helping the family and that they would be able to cover the arrears on their house and stave off foreclosure. And, I made a mental note that in the future I needed to be mindful of high value cars and tight budgets so that I asked for a smidgen more in up front fees on such matters.

This is a round about way to explain why, in discussing a Chapter 13 with your attorney, she or he may seem to waffle a little on the attorney fees. There is a $3,500.00 “no-look” fee in the Eastern District of Kentucky. This does not mean that is a set, required fee. Rather, if your attorney charges that much or less, the court is not going to ask your lawyer to prove up the time she or he spent as an attorney. If more is charged, then an application detailing the work must be produced. Most attorneys will charge the $3,500.00. Where the waffle comes in is how much will be required to be paid up front prior to filing. I tend to go on the low-end because I know things are so tight for people and I make it as affordable as a Chapter 7, but I have to off-set that with the demand of my own expenses.

December 7, 2013 Posted by | Adequate protection, attorney fees, Bankruptcy, Chapter 13, Disposable Income, Disposable Income / Budget, Plan, Plan payments, Secured loan arrears | , , , , , , , , , | Leave a comment

Things to be aware of if facing bankruptcy 6

As a follow-up to my last warning post  where I talked about preferential payments including to insiders (friends and family members). I ended that post saying that after your bankruptcy is completed (discharge order, case closed) then you can repay anyone you like. This post is a caveat to that statement. Do not promise a creditor, whether friend or foe, that you will repay them afterwards. Simply let it be a nice surprise. T

You see, if you end up not paying them in full after the bankruptcy is over, your promise to pay could give them a legal argument to try to overcome the discharge of the debt. Basically, they would say that they relied upon your promise to their detriment and thus you defrauded them.  This could lead to that particular debt suddenly becoming non-discharged. This is an unlikely eventuality, but attorneys deal with such things all the time. So, it is best just to stay silent and pay if you can.

October 25, 2013 Posted by | Bankruptcy, Chapter 13, Chapter 7, Fraud, Fraud | , , , , , , , , , | Leave a comment

More Regarding Making Bankruptcy Affordable

It is a real dilemma: many people with more expenses and debt than income need the relief of bankruptcy and yet filing bankruptcy costs money. People are allowed to file bankruptcy without an attorney. Every form you need is available at the official US Courts website. However, the Bankruptcy Code is a convoluted mess that many learned attorneys steer clear of – so, if you file on your own, be careful. You will not be helped, though, by buying the forms from someone since they are free and paying a petition preparation person who is not an attorney can be dangerous.

From what my clients have told me, I charge a little less (couple hundred dollars or so) than many bankruptcy attorneys in my are and a little more than many lawyers in the area. So, my fees are in the mid-range. However, I currently do all the work myself. That means I am the one who answers to you and to the court. I am the one who takes care to make sure the petition and other pleadings are done correctly and in a manner that will give you the smoothest ride through the bankruptcy process. Furthermore, some lawyers do not do all that I do in the process.

Now, I have said all those other things in prior posts. But, what I wanted to write about is that I have been experimenting with splitting my fees similar to the way it works in Chapter 13. The bulk of the Chapter 7 fees would clearly be spelled out as pre-filing fees. Some of the fees would be specified as for post-filing services, such as attending the meeting of creditors. This is essentially the “un-bundling” of legal fees to make the harder parts of legal access more affordable. You see, any unpaid pre-petition fees for services not collected prior to a Chapter 7 are subject to being discharged debt. That is why previously I have insisted on getting all fees paid up front. However, it seems like times are increasingly tough for a certain sector of clients. I cannot afford to perform the same level of work for lower fees and stay in business, so this is the resolution that makes the most sense.

The down side to this is that the current bankruptcy court for the Eastern District of Kentucky has expressed disfavor of un-bundling of services. So, part of the reason for this post is to advocate for a fresh look at this approach. I am, though, reserving the right to determine which potential clients to which I am willing to extend this offer. I need a certain degree of assurance that my client will indeed pay the post-filing service fees in a timely manner. So, if you contact me, please do not be offended if I am unable to offer this arrangement. I will not be able to offer it to everyone at the same time or, like I said, I will be not be able to offer it at all.  Part of my analysis of this will include the extent of need for this lesser pre-filing fee arrangement and part of it will involve likelihood of paying the post-petition services fees.

October 21, 2013 Posted by | attorney fees, Chapter 7, Discharge, Planning, Pre-filing planning | , , , , , , , , , , | Leave a comment

Making bankruptcy more affordable part 2

I gave one suggestion a couple of days ago about how to make Chapter 7 bankruptcy more affordable by paying court filing fees post-petition. The dilemma still remains that attorney fees in the typical Chapter 7 must be paid in advance. For folks whose wages are being garnished this creates a real conundrum. You are bringing home less money because a huge chunk of your pay is being seized, but you cannot stop the garnishment without filing the bankruptcy. 

One option to explore arises if you are garnished more than $600.00 by any one creditor in the 90 days prior to filing. This creates a preference. If your attorney properly exempts those funds, then you can pursue recovering the money. If the expected return is sufficient, you might be able to assign the right to recover those garnished funds to someone else who, in exchange, covers your attorney fees. Your attorney may even be willing to do this, though not likely for the entire fee because there is some risk that the funds will not be readily surrendered.

September 13, 2013 Posted by | attorney fees, Bankruptcy, Chapter 7, Exemptions, Planning, Pre-filing planning | , , , , , , , , , , , | Leave a comment