West Palm Beach Bankruptcy Blog

The Automatic Stay and Foreclosures

          The foreclosure of your home is automatically stayed when you file for bankruptcy, but that stay will not apply if you filed for bankruptcy within the last two years and the judge lifted the previous stay, thereby allowing the lender to continue with the foreclosure.  That is to say, the law does not allow you to prevent a foreclosure by simply filing successive bankruptcies.

          Even if you are filing for bankruptcy for the first time, doing so will not stop certain time periods related to foreclosure procedures from running.  For instance, the law gives you a certain amount of time before your home is sold.  Once you are notified of the foreclosure, your home cannot be sold until that time period has lapsed.  While filing for bankruptcy will not stop the notice period from running, the sale itself cannot occur while  you are in bankruptcy unless the lender gets permission from the bankruptcy judge to sell your home by first filing a motion to lift the automatic stay.

9 Bankruptcy Exemptions Available in Florida

Nonexempt property is property that a bankruptcy trustee is entitled to take and sell in order to pay your creditors. Exempt property, on the other hand, is property you are allowed to keep during and after your bankruptcy. Of course, the more exempt property you have, the better off you are. The following are nine types of exempt property available in Florida:

1. A homestead exemption that includes real property or personal property (including a mobile or modular home) to unlimited value. However, it cannot exceed one-half acre if it is located within a municipality or 160 acres elsewhere.
2. Annuity contract proceeds.
3. Death benefits payable to a specific beneficiary.
4. Disability or illness benefits.
5. Fraternal benefit society benefits.
6. Life insurance cash surrender value.
7. Alimony.
8. Child support.
9. Damages to employees for injuries in hazardous occupations.

Property That You Cannot Be Forced to Sell to Pay Your Creditors

Property that you own and possess such as cameras, televisions, furniture, tools, clothing, books, computers, cars, real estate, boats, and stock certificates are included in your bankruptcy estate which means that the bankruptcy trustee can sell those things to pay your creditors.

However, there are certain types of property that are not included in your bankruptcy estate including:

• Wages that are withheld for employee benefit and health insurance plans.
• Employer contributions that are made for employee benefit and health insurance plans.
• Property that you buy or receive after you file for bankruptcy.
• Tax-deferred education funds.
• Pensions and retirement plans.
• Property in your possession that belongs to someone else.
• Property pledged as collateral for a loan if a licensed lender retains possession of the collateral.
• Funds placed in a qualified tuition program or Coverdell Education Savings Account as long as you deposit the funds into the account at least one year before filing for bankruptcy and the beneficiary of the account is your child, stepchild, grandchild, or step-grandchild.

Collection Actions Not Stopped by an Automatic Stay

Although many collection actions are stopped by an automatic stay, the following are not:

1. Almost all legal proceedings pertaining to divorce or parenting including actions to:
   • Set and collect current child support and alimony.
   • Establish paternity in a lawsuit.
   • Determine child custody and visitation.
   • Collect back child support and alimony from property that is not in the bankruptcy estate.
   • Suspend a parent’s driver’s license in order to force him to pay child support.
   • Modify child support and alimony.
   • Withhold income to collect child support.
   • Protect a spouse or child from domestic violence.
   • Seize tax refunds to pay back child support.
   • Report overdue child support to credit bureaus.
2. The automatic stay does not prevent withholding from a debtor’s income to repay a loan from most job-related pensions and individual retirement accounts.
3. The Internal Revenue Service can continue to do such things as issue a tax deficiency notice, demand a tax return, issue a tax assessment, demand payment of an assessment, and conduct a tax audit.
4. A landlord has the right to evict a tenant despite the automatic stay if:
   • The landlord obtained a judgment for possession of the rented property before the tenant filed for bankruptcy, or
   • The landlord is evicting the tenant for endangering the property, or
   • The landlord is evicting the tenant for illegally using controlled substances on the property.

The Automatic Stay

People filing for bankruptcy have often been harassed by creditors demanding payment and  threatening lawsuits.  But when you file for bankruptcy, the bankruptcy court immediately and automatically enters an Order for Relief (also known as an Automatic Stay) that requires your creditors to immediately stop their collection efforts.  That means that they cannot:

• Call you.
• Write you letters.
• Garnish your wages.
• Empty your bank account.
• Take your car.
• Take your house.
• Cut off your utility service.
• Cut off your welfare benefits.

While not all collection actions are stopped by the automatic stay, the following are:

• Anyone trying to collect credit card debts.
• Anyone trying to collect medical debts.
• Anyone trying to collect attorney’s fees.
• Anyone trying to collect debts arising from a breach of contract.
• Anyone trying to collect legal judgments against you (other than for child support or alimony).
• Government entities trying to collect overpayments of public benefits such as Medicaid, SSI, or Temporary Assistance to Needy Families cannot reduce or stop your benefits.
• If you were convicted of a crime such as writing a bad check and were sentenced to do community service and pay a fine, you will still have to do the community service, but you will not have to pay the fine.
• The automatic stay stops the Internal Revenue Service from issuing a lien against you or trying to take your property or income.
• Foreclosures are automatically stayed unless you filed for bankruptcy within the previous two years and the bankruptcy court lifted the automatic stay  in the earlier case, thereby allowing the lender to proceed with the foreclosure.
• Utility companies (such as gas, heating oil, telephone, water, electricity) cannot cut off your utilities once the automatic stay is in effect.  However, they can stop your service twenty days after you file for bankruptcy if you do not provide them with a deposit to assure future payment.

8 Things a Bankruptcy Judge Might Look at to Determine if You Committed Credit-Card Fraud

When you file a petition with the bankruptcy court to declare bankruptcy, those individuals and businesses to whom you owe money (otherwise known as “creditors”) are allowed to file objections with the bankruptcy court stating why they believe that the debt owed to them should not be erased (or “discharged”) in the bankruptcy proceeding.

When it comes to credit-card companies filing such objections, bankruptcy judges look at some of the following things to determine if you committed credit-card fraud:

• Charges made after the credit-card company ordered you to return your card or sent you several “past due” notices.
• Recent charges for luxuries over $550.00 are presumed fraudulent.
• If you acquire more debt after consulting with a lawyer, a bankruptcy judge may conclude that you ran up your debts in anticipation of your filing for bankruptcy.
• Filing for bankruptcy soon after incurring charges might indicate fraudulent intent.
• Charges made when you were clearly unable to pay the minimum amount due on your credit-card bill (for example, you lost your job and had no other sources of income) are suspect.
• Multiple charges made on the same day.
• Changes in your pattern of spending (for example, you incurred a lot of charges related to travel expenses after not having previously traveled all that much).
• Multiple charges less than $50.00 (in order to avoid preclearance of the charge by the the credit-card company) after you have reached your credit limit.

The mere fact, however, that a credit-card company files an objection does not necessarily mean that the bankruptcy judge will rule in its favor.  If, for example, such a company objects that several of the charges appear to be fraudulent but does not explain why it believes that to be true, the judge may find that the company failed to prove its case and still discharge the debt in question.

Fifteen Things You Can Ask a Credit-Card Company That is Objecting to Your Petition for Bankruptcy

If a credit-card company files an objection with the bankruptcy court regarding your petition to file for bankruptcy, you, the debtor, have the legal right to send a list of written questions to that company demanding to know precisely why they believe you fraudulently incurred the debt in question.  That company must, in turn, respond to your questions in writing and under oath.  Some of the things you might state to the credit-card company include:

1. Provide all of the proof that your company has supporting its allegation that the debtor incurred charges that he did not intend to repay at the time he incurred them.
2. State with particularity the false representations that the debtor allegedly made with regard to his account with your company.
3. State each of the steps taken by your company to determine the debtor’s creditworthiness.
4. Provide copies of all of the documents that your company has in its possession that were used to verify the debtor’s income.
5. Provide copies of all of the documents that your company has in its possession that were used to verify the debtor’s expenses.
6. Provide copies of all of the documents that your company has in its possession that were used to verify the debtor’s assets.
7. Provide copies of all of the documents that your company has in its possession that were used to verify the debtor’s liabilities.
8. What are your company’s general policies concerning the decision to grant someone credit?
9. How were your company’s general policies concerning the decision to grant someone credit applied in this particular case?
10. Identify each of the credit policies that your company alleges were violated in this case.
11. State how your company communicated to the debtor each of the credit policies that your company alleges were violated in this case.
12. Provide copies of all of the documents that contain your company’s general policies concerning the decision to grant someone credit.
13. Identify the date(s) on which the debtor allegedly consulted a bankruptcy attorney.
14. Identify the date on which the debtor allegedly formed the intent not to repay his debt to your company.
15. Identify the date(s) the debtor allegedly violated the terms of the credit agreement he had with your company.

If a credit-card company receives this list of questions, it will know that you intend to fight their objection about whether your debt should be discharged in bankruptcy.  If you are lucky, the company might even withdraw its objection rather than spend the time needed to answer your questions.