What is this thing I got in the mail?

If you get something in the mail and you’re not sure what to make of it, either bring it to me or scan and e-mail a copy to me.  Generally, I don’t like to comment on letters or documents if I can’t see them.  And no, I don’t have magical powers that allow me to see what you’re holding in your hand at home.
That said, let’s talk about some of the documents you might see once you file for bankruptcy.
“Notice of Appearance”
  • If a creditor files a notice of appearance, it means that they intend to have a more active role in your bankruptcy case than normal.  More, of course, is a relative term.  In basic, no-asset Chapter 7 cases, most creditors assume no role whatsoever in your bankruptcy proceedings.
  • A notice of appearance is often just a way for a creditor to receive electronic notices instead of conventional notices by mail.  It also usually means that an attorney for the creditor is keeping an eye on the case.
  • Sometimes, a notice of appearance is an indication that a creditor has hired an attorney (who needs to get himself or herself added to the list of people who receives notices in your bankruptcy case) so that they can file motions or objections.
  • Less often, a notice of appearance is filed when a creditor actually intends to make an appearance at your meeting of creditors or some other judicial hearing.

“Motion for Relief from Stay” (or “Motion to Lift Stay”)
  • When your bankruptcy case is filed, an automatic stay goes into effect that stops most collection actions, including wage garnishments, repossessions, and foreclosures.  If someone is filing a motion for relief from the stay, they are asking the court for permission to be exempt from the stay so they can proceed with certain actions.
  • 99% of the time, these motions are filed by secured creditors who are seeking to foreclose your home or repossess your car.
  • If your intention was to surrender the collateral, then there is nothing that you need to do.  The motion for relief is a mere formality so the creditor can proceed to exercise its security rights.
  • If your intention was to retain the collateral, talk to your attorney immediately!  You only have 14 days to object and figure out how to save the collateral.

“Notice of Intent to Pay Claims”
  • In Chapter 13 cases (and in Chapter 7 cases where a trustee is distributing assets), the trustee is required to file this notice to formally announce his intent to pay or not pay certain claims that creditors have filed.
  • Generally speaking, the trustee will pay all claims filed unless the claim was filed after the deadline to file claims or if a judge rules that a claim is disallowed.
  • The trustee may file a notice like this several times throughout your bankruptcy case if claims are amended, withdrawn, or supplemented.

“Notice of Mortgage Payment Change” & “Notice of Additional Mortgage Fees”
  • Throughout the life of a Chapter 13 Bankruptcy case, it is common for your mortgage payment to adjust due to variable interest rates or changes in your escrow payments.
  • Sometimes, your mortgage lender will charge additional fees – which they are allowed to do pursuant to the terms of the mortgage – for certain activities such as appraisals, property inspections, or legal fees.
  • Although they have always had these abilities, a relatively new procedural rule now requires the mortgage companies to file a notice with the bankruptcy court and serve a notice on you.  This helps your attorney and the trustee stay updated about changes in your mortgage that has the potential to have an impact on your bankruptcy case.

November 2014 Median Income Levels

Median income levels are set for their semi-annual change on November 1, 2014.  In Wisconsin, for household sizes of two and three, the change is negligible.  Households of four and greater will find it slightly easier to qualify for Chapter 7.  The biggest impact will be on households of one, where the median is dropping almost $2k.
Old Numbers:
HH1: $44,602
HH2: $58,751
HH3: $68,801
HH4: $81,373
New Numbers:
HH1: $42,969
HH2: $58,786
HH3: $68,489
HH4: $82,350
Debtors must report their annualized gross income based on their past six months of income.  Above-median debtors are presumed to have to file for Chapter 13 Bankruptcy and below-median debtors are presumed to qualify for Chapter 7 Bankruptcy (although both presumptions can be rebutted).  Median income levels vary by state of residency and household size.

Office Relocation

At the end of this month, I will be closing our current office and begin practicing out of my home office.  There are two reasons for this.  First – bankruptcy filings have decreased over the past few years, and this is just one of many steps I’ve taken in the past several months to reduce overhead.  Second – is to spend more time with family and friends.  For the past two years, I’ve offered regular appointments until 9pm.  It’s a service I’m happy to provide for people who work 9-5 jobs, but the extra hours have put a strain on me, and that strain can be easily remedied by working from home.
Office hours will continue to be 9am – 9pm Monday through Wednesday, and 9am – 5pm Thursday and Friday.  However, I remind you to please call ahead before dropping by to ensure that I will be available to help you.  A locked drop-box will be available for dropping off documents after hours.
Effective November 1, 2014, the address for this office will be:
2018 Candle Way
Green Bay, WI 54304

Debt Collector Threats / Scaring People Away from Bankruptcy

I’ve written previously on the topic of debt collectors who threaten people with criminal charges if they don’t pay their bills.  That post is just over three years old, and so I wanted to update that post and also talk about another common threat – that your debt can’t be included in your bankruptcy case.
First and foremost, what CAN debt collectors do?

  1. Prior to filing for bankruptcy, any creditor has the right to file a lawsuit and obtain a judgment against you for the debt you owe.  Once your bankruptcy case is filed, any civil litigation that hasn’t begun is prevented and any civil litigation that is pending is terminated.
  2. Creditors who believe that they can make a criminal case for fraud can press charges with the appropriate prosecuting agency.  Bankruptcy does not stop these proceedings.
  3. If a creditor believes they can make a case for fraud or misrepresentation (523(a)(2)), fraud or embezzlement in a fiduciary capacity (523(a)(4)), or willful or malicious injury (523(a)(6)), then they can file an adversary proceeding to have the debt declared non-dischargeable.

But here’s what a debt collector can NOT do.

  1. Enforce a civil judgment that is discharged in bankruptcy.  Civil lawsuits and judgments – in and of themselves – are not special debts.  Just because a judgment has been entered against you does not mean that the debt cannot be discharged in bankruptcy.
  2. Creditors cannot seek to collect a debt by threatening criminal prosecution.  What does that mean?  It means that if they think they have a criminal case, then they should just press charges.  They cannot try to strike a deal with you where they drop the charges in exchange for payment from you.  If they do, then they are potentially guilty of two things…
    1. If a bankruptcy case has been filed and they make these threats, then they are in violation of the automatic stay.  Acts of criminal prosecution are distinguishable from threats of criminal prosecution.  The former is not stayed by bankruptcy, but the latter is stayed.  Desert Palace, Inc. v. Baumblit (In re Baumblit), 15 Fed. Appx. 30, 35-36 (2d Cir. N.Y. 2001) and Batt v. Am. Rent-All (In re Batt), 322 B.R. 776, 779 (Bankr. N.D. Ohio 2005).
    2. Even if a bankruptcy case is not filed, they would be guilty of criminal extortion in Wisconsin, under Wis. Stat. sec. 943.30.

Here are some other important things to remember…
Just because a creditor has the right to file an adversary proceeding under 523(a)(2, 4, or 6), and just because a creditor has the right to press criminal charges, that doesn’t mean that they’re going to.  The intent element to showing fraud is extremely difficult to prove.
99% of the time, the debt collector is blowing smoke – trying to scare you into paying the debt rather than filing for bankruptcy.  It’s an incredibly successful tactic, but also an illegal one.