Bankruptcy Judge Whitney Rimel (of Fresno) issue an interesting opinion (In re Gay, No. 06-10472) recently on the issue of the circumstances under which the automatic stay can be reinstated. By way of background, the automatic stay goes into effect immediately upon the filing of a bankruptcy case. It prevents creditors from taking any action to collect a debt.
The new bankruptcy law (BAPCPA) made some changes to the automatic stay, including a provision that if you filed one bankruptcy within the year preceding the current filing and that filing was dismissed for any one of several reasons, the automatic stay expires after 30 days and another provision that if you filed had two bankruptcy cases dismissed within the last year, there is no automatic stay upon the filing. It can be reinstated upon a showing by clear and convincing evidence that the case was filed in good faith.
In In re Gay, there had been two previous dismissals. In considering whether the new case was filed in good faith, Judge Rimel looked primarily to the issue of whether there had been a change in circumstances. The debtors presented evidence that their income had stabilized since the previous filings. However, the court found this unpersuasive and determined that the debtors did not rebut by clear and convincing evidence the presumption that the third filing was not in good faith. Consequently, the stay was not reinstated and the debtors probably lost their home.
This should give anyone pause who is considering filing a bankruptcy case. If the case is dismissed, you may lose the automatic stay if you have to file again. This is especially a problem for debtors who represent themselves in bankruptcy. I had that issue with a client recently. He filed in pro per (without an attorney), did not comply with all of the requirements, and his case was dismissed. He immediately refiled and then hired me to get the automatic stay reinstated (which we did). He could have avoided a lot of problems by hiring an attorney to help him with the first case.
Friday, September 15, 2006
Monday, September 11, 2006
12 myths about bankruptcy
This article entitled 12 myths about bankruptcy has some good information. For additional myths, go to
http://www.fresnobklaw.com/myths.php.
http://www.fresnobklaw.com/myths.php.
New Bankruptcy Law: Credit Cards Before God?
Here is an article about a bankruptcy ruling out of New York that said a religious debtor was not allowed to use chartiable contributions as an expense; ergo, the debtor had to pay credit card debt for 5 years before he could again donate to the church. Click here for the full text of the decision. Most of the news articles on this don't do a very good job of explaining what actually happened.
Many people have heard of the "means test" that is part of the new bankruptcy law (BAPCPA). Essentially what happens is that a debtor's income is examined and if the debtor is above the median income for his state, the debtor has to use a set of IRS guidelines to determine whether the debtor has any disposable income that could be used to pay creditors. Debtors who are under the median income do not have to use the IRS standards. They use their actual expenses. The importance of what set of expenses you use is that if your expenses are more than your income, you qualify to file Chapter 7, and even if your expenses are less than your income, your expenses determine how much you have to pay per month in a Chapter 13. (This is a great oversimplification, but it states it in concise terms.)
Because of a furor over decisions like the Diagostino decision before BAPCPA, Congress enacted a law that allowed religious contributions to be counted as an expense. The Diagostino decision essentially says that by enacting BAPCPA, Congress undid that allowance for any debtor who is over median. So, now over-median debtors are not allowed to make charitable contributions while in a Chapter 13 case. Just for example, a single debtor in California is over median if he makes about $50,000 a year.
UPDATE: Orrin Hatch, a proponent of BAPCPA and senator from Utah, issued a press release stating his disagreement with the opinion. Then, he got a bill (Senate Bill 4044) passed by the Senate changing the law so that the Court's ruling would be overturned. The bill has been sent to the house, but probably will not be considered soon do to the impending election. But to hear Senator Hatch talk about it, he's saved the (tithing) world.
Many people have heard of the "means test" that is part of the new bankruptcy law (BAPCPA). Essentially what happens is that a debtor's income is examined and if the debtor is above the median income for his state, the debtor has to use a set of IRS guidelines to determine whether the debtor has any disposable income that could be used to pay creditors. Debtors who are under the median income do not have to use the IRS standards. They use their actual expenses. The importance of what set of expenses you use is that if your expenses are more than your income, you qualify to file Chapter 7, and even if your expenses are less than your income, your expenses determine how much you have to pay per month in a Chapter 13. (This is a great oversimplification, but it states it in concise terms.)
Because of a furor over decisions like the Diagostino decision before BAPCPA, Congress enacted a law that allowed religious contributions to be counted as an expense. The Diagostino decision essentially says that by enacting BAPCPA, Congress undid that allowance for any debtor who is over median. So, now over-median debtors are not allowed to make charitable contributions while in a Chapter 13 case. Just for example, a single debtor in California is over median if he makes about $50,000 a year.
UPDATE: Orrin Hatch, a proponent of BAPCPA and senator from Utah, issued a press release stating his disagreement with the opinion. Then, he got a bill (Senate Bill 4044) passed by the Senate changing the law so that the Court's ruling would be overturned. The bill has been sent to the house, but probably will not be considered soon do to the impending election. But to hear Senator Hatch talk about it, he's saved the (tithing) world.
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