The Woodlands TX Bankruptcy Attorney » Rich Shea

Discharge Your Tax Debt in Chapter 7

Rich Shea — Sun, 29 May 2011 12:22:42 +0000

Are you stuck paying tens of thousands of dollars in back taxes and penalties from old tax debts? If your tax debt does not fall into any of the following categories, then it is very likely your Woodlands Bankruptcy Attorney can get the debt discharged in Chapter 7 bankruptcy:

1. Any tax for which a return was not filed, for which a fraudulent return was filed, or which the debtor willfully attempted to evade;

2. Any tax with respect to which a late return was filed within two years before filing for bankruptcy;

3. Income Taxes:
a – for which a return was last due within 3 years of filing for bankruptcy; or
b – assessed within 240 days before filing for bankruptcy; or
c – not yet assess, but assessable after filing bankruptcy.

4. Property taxes assessed before filing and payable without penalty less than one year before filing.

If your tax debt does fall into one of the categories described above, then you may be eligible to discharge your debt at a later date provided you did not willfully attempt to evade the tax.

Contact The Shea Law Firm at (832) 592-7913 if you need to speak with an experienced bankruptcy lawyer about how to lose your tax debt, credit card debt, and debt from medical bills.

Deadline to Discharge Student Loans

Rich Shea — Fri, 07 Jan 2011 12:45:49 +0000

Student loan debt is often difficult to get discharged by the Houston bankruptcy court. There are so many factors involved that even if you did not satisfy all of the criteria in your original bankruptcy case you may become eligible for discharge years later based on events such as unemployment, reduced income, or disability.

Fortunately, if your facts and circumstances change over the years since your Chapter 7 discharge your Woodlands Bankruptcy Attorney can file additional adversary proceedings to continue to pursue discharge without going through an entirely new bankruptcy provided the student loans existed at the time your previous bankruptcy petition was filed. If you have student loans that you received after your last bankruptcy petition was filed then they would not be eligible to be included in this special procedure.

Call The Shea Law Firm at (832) 592-7913 if you need an experienced bankruptcy lawyer.

What Are Your Intentions?

Rich Shea — Mon, 03 Jan 2011 12:56:08 +0000

Within 30 days of filing your petition for Chapter 7 Bankruptcy relief your bankruptcy attorney must file your Statement of Intentions with the court. If your Meeting of Creditors is scheduled earlier than 30 days after your case is filed then you must file the Statement of Intentions before that meeting.

The Statement of Intentions applies to all real or personal property you own that serves as collateral for a debt.

For each piece of property you must state:

whether you will surrender the property or keep the property;
whether you will redeem the property;
whether you will reaffirm the debt secured by the property; and
whether the property will be claimed as exempt.

If you are not sure how to answer these important questions then speak with a Woodlands Bankruptcy Attorney today about representing you through the bankruptcy process to protect your rights and property.

Follow-Through

You are generally required to follow-through on your intention for each piece of property within 30 days after the first date scheduled for the Meeting of Creditors. If you intend to surrender the property that means being prepared to turn the property over. If you intend to redeem the property that means having the funds necessary to perform the redemption. If you intend to reaffirm the debt that means having a reaffirmation agreement in place with the creditor.

Why You Don’t Hide Assets

Rich Shea — Thu, 25 Nov 2010 12:56:51 +0000

Intentional or not, some people that start that bankruptcy process try to hide assets. This is usually done based on the belief that if you don’t tell anyone about it they won’t find it. That is a flawed assumption for many reasons which we will get into another time, but for now let’s focus on the bottom line. Are you really protecting your assets or risking assets when you attempt to hide something?

Myth – you have to lose all of your property in bankruptcy.

Fact – you only lose your non-exempt property through the bankruptcy process.

The first rule of preserving property with an exemption is that your Woodlands Bankruptcy Attorney has to know it exists. If your bankruptcy attorney does not about a specific piece of property and does not set aside an exemption for it then you risk losing it to the bankruptcy trustee. Clearly this is not the result most people intend which is why it is absolutely critical that you tell your bankruptcy attorney everything that you own.

Many of the people I represent through the bankruptcy process can keep all of their property with strategic use of their bankruptcy property exemptions. Anything they do not tell me about at the outset may be impossible to protect later on. This is why you do not attempt to hide assets.

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Your Student Loan Can Be Discharged in Bankruptcy!

Rich Shea — Tue, 02 Nov 2010 11:41:56 +0000

Student loans are a booming industry. The government guarantees the loan so schools everywhere saw a wonderful opportunity to raise tuition to the sky. And since it is not easy to discharge a student loan in bankruptcy lenders were almost always standing by ready to lend unsuspecting students large sums of money on a degree that may not be worth the price paid. What can you do if you are being buried by student loans?

It is not easy to get a student loan discharged in bankruptcy. Not easy at all, but it can be done under very specific conditions. It all comes down to the judge’s definition of “undue hardship.”

“Undue Hardship” is the legal standard used in the Bankruptcy Code to determine if a student loan should be discharged in a bankruptcy proceeding. However, Congress never defined what they meant by “undue hardship” so each judge has been left to create their own definition. Almost everyone agrees that an undue hardship is something more than regular hardship, but there are differences of opinion to how onerous the hardship must be.

Most courts have relied on the Brunner test in evaluating undue hardship. Under the Brunner test you may prevail on an undue hardship claim if:

You can not maintain, based on current income and expenses, a “minimal” standard of living for you and your dependents if forced to repay the student loan;
Additional circumstances exist indicating that your current state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and
You have made a good faith effort to repay the student loan(s).

If you believe you satisfy the criteria described above then you may be eligible to pursue a discharge of your student loans. Your Woodlands Bankruptcy Attorney can help review your facts and present your case in the best light to the bankruptcy court. Be prepared if you intend to pursue a discharge of your student loans: the process is longer, more expensive, and there will be more hearings than in your normal bankruptcy case; but this may be your only chance for the next 8 years to get your student loans discharged.

Get Help

The Shea Law Firm is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t risk losing property you may be able to keep. Call (832) 592-7913 and speak with a Woodlands bankruptcy lawyer today.

LoneStarBankruptcy.com provides the latest news and information on Chapter 7 and Chapter 13 bankruptcy in the Southern District of Texas. The Federal Bankruptcy Court for the Southern District of Texas covers many communities including: Houston, Spring, Conroe, The Woodlands, Montgomery County, and Harris County. If you need legal assistance with a personal bankruptcy matter speak with a Woodlands Bankruptcy Attorney today at (832) 592-7913.

Deadline to Discharge Student Loans

Inherited IRA Included in Bankruptcy Estate

Rich Shea — Sun, 27 Jun 2010 19:17:28 +0000

Property you own is included in your bankruptcy estate unless your Woodlands Bankruptcy Attorney manages to find a legal basis for exempting it. One of the common exemptions people take advantage of is the exemption for retirement accounts. Unfortunately, this exemption is not without limits and a recent case reminds us of the boundaries of this bankruptcy exemption within the federal bankruptcy exemption rules.

Janice Chilton, a debtor in a bankruptcy case, claimed the IRA she inherited from her mother is exempt under §522(d)(12). The discussion that follows is limited to the federal exemption for retirement accounts and not the Texas exemption.

Section 522(d)(12) of the Bankruptcy Code allows your Woodlands Bankruptcy Lawyer to exempt “[r]etirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457 or 501(a) of the Internal Revenue Code of 1986.” In order to determine whether funds are exempt under §522(d)(12), the Court must engage in a two-part test. First, the Court must determine whether the funds are “retirement funds.” Second, if the funds are retirement funds, the Court must determine whether the funds are exempt from taxation under the applicable provisions of the Internal Revenue Code.

The Retirement Funds Test

Janice Chilton’s bankruptcy attorney argued to the Court that the funds in the inherited IRA are clearly retirement funds since they are in a retirement account. The court in this case stressed that adopting that interpretation of “retirement funds” would be much broader than intended by Congress and would in fact exempt any property in a retirement account and not just “retirement funds.”

The Court looked to the whole statutory text and all the words of §522(d)(12) in determining the plain meaning of “retirement funds.” It found Congress repeatedly used the word “retirement” in §522 to qualify the types of funds and accounts that may be exempted from the bankruptcy estate. Although the Bankruptcy Code does not define “retirement,” the term is generally understood as “withdrawal from one’s position or occupation or from active working life.” The Court concluded that, viewing the words “retirement funds” in their entire context, they cannot reasonably be understood to authorize an exemption of an inherited IRA. The funds contained in an inherited IRA are not funds intended for retirement purposes but, instead, are distributed to the beneficiary of the account without regard to age or retirement status.

The Exempt from Taxation Test

Even though the Court found an inherited IRA did not pass the “retirement funds” test, it went on to consider the “exempt from taxation” test in this case.

Janice Chilton’s bankruptcy attorney argued that the inherited IRA is an eligible rollover under Internal Revenue Code §402(c)(11) and, therefore, is exempt from taxation under §408(e)(1).

The Court ruled an inherited IRA, which is a vehicle for receiving distribution from a tax exempt account, does not fit within the definitional scope of §408(e)(1) and as a result that section cannot be used to claim a bankruptcy exemption.

The court completed its analysis by noting inherited IRAs are controlled by Section 402(c)(11) of the Internal Revenue Code. The tax status of an inherited IRA controlled by Section 402 is not a recognized basis for exempting the account under Section 522(d)(12) of the Bankruptcy Code.

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2010 Federal Bankruptcy Exemptions

Rich Shea — Tue, 22 Jun 2010 21:05:32 +0000

Every three years the federal bankruptcy exemptions are adjusted for inflation. The adjustment for 2010 applies to cases filed on or after April 1,2010. The federal bankruptcy exemptions are:

Homestead: $21,625
Vehicle: $3,450
Household Goods: $11,525 total with no single item exceeding $550
Jewelry: $1,450
Wild Card: $1,450
Tools of the Trade: $2,175
Unmatured Life Insurance: $11,525
Personal Injury Claims: $21,625
IRA: $1,171,650

Remember these are only the federal exemptions. Texas also has its own set of bankruptcy exemptions which you may be entitled to keep. Exactly which set provides you with the most protection depends on your unique circumstances. Your bankruptcy lawyer can review your situation and help you pick to best exemption rules.

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Why You Need to Choose Texas or Federal Exemptions Carefully

Rich Shea — Mon, 17 May 2010 21:16:48 +0000

Every Woodlands Bankruptcy filer faces a choice to use the Texas or Federal Bankruptcy property exemptions. They each have their pros and cons. Exactly which exemption rules are better depends entirely on your unique case. Once you choose to use either the Texas or Federal Bankruptcy exemptions you may not be allowed to change your choice later on even if your circumstances change after your case is filed. The wrong choice can result in you losing property that you may have been able to keep through Bankruptcy. That is what happened to the Schellenbergs. Do not let it happen to you, call (832) 592-7913 to speak with a Woodlands Bankruptcy Attorney today.

Background

The Schellenbergs filed a Chapter 13 Bankruptcy petition on February 2, 2009. The purpose of the filing was to protect from foreclosure a horse ranch that the Schellenbergs had built that was to serve as their homestead and horse training business. The Schellenbergs had borrowed $772, 000 from First State Bank of Central Texas (“FSBCT”) on or about August 10, 2006. On the date of their bankruptcy petition, the Schellenbergs owed the full amount of the Note plus accrued interest in the amount of $802, 045.06.

At the hearings on FSBCT’s Motion for Relief from Stay, Mrs. Schellenberg testified that it was her life’s dream and ambition to operate a horse business. She further testified that the Chapter 13 filing was to halt foreclosure and to find alternative financing. The Schellenbergs were unable to find alternative financing and the Court granted FSBCT’s Motion for Relief from Stay which allowed FSBCT to conduct a foreclosure on August 4, 2009.

On or about March 5, 2009, the Schellenbergs filed their Schedules. The Schellenbergs’ homestead property was listed as exempt with a value that exceeded the debt by roughly $575,000. The Schellenbergs claimed state exemptions and, as such, the homestead property was completely exempted.

After FSBCT conducted its foreclosure, the Schellenbergs converted their case to Chapter 7 on September 10, 2009. The Schellenbergs then filed Amended Schedules on October 30, 2009. The Schellenbergs switched the basis of their exemptions to federal exemptions. Notably, the Debtors did not list their homestead property or its purported equity in their Amended Schedules because the property had been foreclosed.

Because the Schellenbergs had switched from state to federal exemptions upon conversion to Chapter 7, and also because the Schellenbergs no longer claimed a homestead exemption, the Schellenbergs were able to exempt property after conversion to Chapter 7 that they did not exempt when they filed Chapter 13. Specifically, the Schellenbergs now exempted four checking and one savings account in the aggregate amount of $3,068.55. Further, they have exempted a personal injury award with a stated recovery of $15,000.10 and some miscellaneous items in the amount of $225.

The Objection

The Chapter 7 Bankruptcy Trustee filed his Objection to Debtors’ Amended Schedule C Property Claimed or Exempt on November 25, 2009. The Chapter 7 Trustee does not dispute the Debtors’ right to file amendments to their Schedules. That said, the Trustee argues that the Schellenbergs have already removed real property from the bankruptcy estate by exempting the real property under Section 522(b)(3). In doing so, the Schellenbergs also removed the purported equity of over $568,000 in the property. The fact that the property was foreclosed does not change the property’s exempt status. Now the Schellenbergs wish to exempt even more property from the estate by using federal exemptions. The Trustee asserts that switching exemptions is prejudicial to creditors.

The Response

The Schellenbergs contend that there is no prejudice to the Chapter 7 Trustee because they claim that the Fifth Circuit focuses on whether there is prejudice to a creditor who relied on the Debtors’ exemptions before conversion. As such, because the Chapter 7 Trustee was not a party during the Chapter 13 bankruptcy, there can be no detrimental reliance by the Chapter 7 Trustee. Moreover, the Debtors contend there is no prejudice to the Chapter 13 Trustee because she cannot liquidate property.

Also, the Debtors that contend even if the Court were to analyze the matter from the perspective of a hypothetical unsecured creditor, there is still no prejudice because it was unlikely that the Debtors could have sold their homestead for the stated equity. Moreover, FSBCT did foreclose on the property, leaving no equity to anyone. The Debtors also contend that there has been no showing that any party/creditor detrimentally relied on the Debtors’ initial exemptions such that they are prejudiced by the amended exemptions.

Analysis

The Court finds the Chapter 7 Trustee is correct in his arguments. The Fifth Circuit held in In re Williamson that exemptions, for purposes of when they are determined in a case converted from Chapter 11 to Chapter 7, are determined on the petition date. The Fifth Circuit did, however, recognize that amendments under Rule 1009 are liberally construed if there was no bad faith or prejudice to creditors. Similarly, in In re Sandoval the Fifth Circuit held that a homestead exemption in a case converted from Chapter 13 to Chapter 7 is determined on the petition date.

As the Trustee points out, exemptions are determined on the date of petition, not conversion. Further, although Rule 1009(a) does allow for liberal exemptions, exemptions can only be allowed under applicable law. The Schellenbergs elected to file Chapter 13 and protect their perceived equity in their homestead. The Chapter 13 case failed. The conversion to Chapter 7 affords the Chapter 7 Trustee the ability to administer non-exempt assets. As such, the Schellenbergs ‘ cash, personal injury award, and miscellaneous personal property are subject to administration. The Schellenbergs are incorrect in their assertion that there is no prejudice – both the Chapter 13 and 7 Trustees relied upon the original claim of exemptions as did the creditors. To allow the Schellenbergs to amend their exemptions gives them the ability to exempt more property than was originally claimed and was originally exempt. The Court granted the Trustee’s Objection.

Get Help

The Woodlands Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t risk losing property you may be able to keep. Call (832) 426-393 and get help today.

In re Schellenberg, 09-10272-CAG

The First 15 Days of Your Chapter 7

Rich Shea — Wed, 27 Jan 2010 12:58:33 +0000

Each Woodlands Bankruptcy case has their own timeline. However, there are certain court imposed deadlines that you must meet. Your case can be dismissed if you do not provide the required information to your Woodlands Bankruptcy Attorney in time to meet these deadlines.

Here is what must be taken care of in the first 15 days of your Chapter 7 case. This is the bare minimum, depending on your circumstances additional filings may be required.

Filing Fee of $245. This must be paid when your case is filed, unless you file a request for installment payments or a waiver.
Administrative fee of $39 and trustee surcharge of $15.
Voluntary Petition. Names and addresses of all creditors of the debtor. These documents must be filed WITH the petition.
Notice to Individual Debtor with Primarily Consumer Debts under 11 U.S.C. § 342(b). Your Woodlands Bankruptcy Attorney must give you this notice before your case is filed and it must be certified on your original petition or within 15 days.
Statement of Social Security Number. This must be submitted with the original petition.
Individual Debtor’s Statement of Compliance with Credit Counseling Requirement. Exhibit D must be filed with your petition. The certificate itself can be filed with the petition or within 15 days.
Statement of current monthly income. This must be filed with the petition or within 15 days.
Schedules of assets and liabilities. This must be filed with the petition or within 15 days.
Schedule of executory contracts and unexpired leases. This must be filed with the petition or within 15 days.
Schedules of current income and expenditures. This must be filed with the petition or within 15 days.
Statement of financial affairs. This must be filed with the petition or within 15 days.
Copies of all payment advices or other evidence of payment received by the debtor from any employer within 60 days before the filing of the petition. These must be filed with the petition or within 15 days.

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The Woodlands Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Don’t risk the judge dismissing your case because you missed a deadline. Get help today.

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Texas Bankruptcy Exemptions – Jewelry

Rich Shea — Wed, 06 Jan 2010 12:39:14 +0000

Exempt property is the property you can keep in a Chapter 7 case without having to turn over to the bankruptcy trustee. Any property you have that your Conroe Bankruptcy Attorney does not claim as exempt or that does not qualify as exempt is subject to being turned over to the bankruptcy trustee and liquidated to repay debts. Texas law provides for several property exemptions. Today we will examine the exemption for jewelry.

Sections 42.001(a) and 42.002(a)(6) of the Texas Property Code allow an exemption for jewelry not to exceed 25 percent of the aggregate limitations prescribed for exempting personal property. As of this date, the personal property exemption limit is $30,000 for an individual or $60,000 for an individual that qualifies as head of a family unit.

How Does the Jewelry Exemption Work?

In a case where you can exempt $30,000 of exempt personal property, the jewelry exemption is limited to $7,500.

In a case where you can exempt $60,000 of exempt personal property the jewelry exemption is limited to $15,000.

Both of these figures are aggregate amounts, meaning all of your jewelry combined cannot exceed the above dollar amounts. It is not a per item exemption.

Get Help

Your Conroe Bankruptcy Attorney is here to help you get through the bankruptcy process and protect your rights to the fullest extent. Keep all the property you are entitled to keep with your exemptions. Get help today.

In re Fink, Case No. 07-36827-H3-7 (Bankr. S.D. Tex. 9/17/2009)