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Overview: The Bankruptcy Code requires Chapter 13 plans to be “proposed in good faith”. The code does not have a set standard of what meets this “good faith” test, but courts tend to have a list of factors they consider along with a totality of the circumstances test to determine good faith. Today’s post details what that means for debtors filing plans in Kansas and if the factors set out in Flygare are still relevant for a good faith analysis.

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Overview: 

When you are considering filing for bankruptcy and you are married, you must decide whether or not you and your spouse want to file together, only have one person file, or both file separately.  You have the option to file jointly, meaning all property of both spouses and all debts become property of a single bankruptcy estate. You can also file separately without your spouse or only one of you could file. Depending on your situation, one may be more beneficial than the other. 

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Financial disclosure is paramount in filing a bankruptcy petition and can impact the chances of a discharge. In re Lana shows us that the trustee is always looking, even post discharge, for undisclosed assets and why it is important to disclose any potential lawsuit or settlement in your Schedule A/B. Today’s article will touch on personal injury claims and how they fit into the bankruptcy estate. 

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The short answer is no. The long answer is still no unless the circumstances are appropriate.

If you borrow money from your retirement account to build a gazebo or replace the roof on your house or even to buy a car it might be a financially sound decision. You have something tangible to show for it – a gazebo, roof, or car. As long as you are paying attention to your budget and not over extended it should be okay. This is not the same as paying off debts.

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If you are interested in filing bankruptcy or getting more information about it then the first thing to know is that regardless of what type of case you would like to do your attorney should cover all of your options with you.  This will normally include Chapter 7 and Chapter 13 cases.  If you have yourself set on a Chapter 7 you should know that you do not automatically get to file a Chapter 7 case.  You have to qualify.

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One of the most common questions by someone considering Chapter 13 bankruptcy is how much is my monthly payment and how long is the repayment plan?    

The base length of repayment in a Chapter 13 bankruptcy plan first depends on the income of the debtor or debtors. This is a starting point and defines the minimum amount of time normally required for each case.  Lawyers refer to this as the Applicable Commitment Period or the ACP.  Each state has a median income amount determined by family size. For example, in Kansas, the median income for 1 earner is $4,330 per month while $7,741 is the median monthly income for a family of 4. If household income is below the median the ACP is 3 years.  This means the plan must run for at least 3 years or until all creditors can be paid in full during a shorter period, whichever happens first. If household income is above the median then the ACP is 5 years.  This means the plan must run 5 years unless all creditors can be paid in full during a shorter period.  

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When you file a chapter 13 bankruptcy there is always a concern that you will end up paying not only your attorney fees but those of your creditors.  In some cases where there is a secured claim it is possible that the person filing the bankruptcy could be responsible for the fees generated by the attorney for the creditor.  The example that most often comes to mind are fees for the production and filing of a proof of claim on a home mortgage.  The attorney for the mortgage company is usually allowed a claim for their attorney fees that is added to the claim and paid through the bankruptcy case.  Most of this is anticipated ahead of time and it is basic required work for the bankruptcy case to run smoothly.  

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The Automatic Stay is an injunction that goes into effect when a bankruptcy case is filed.  An injunction is a court order that tells people to do something or not do something.  The Automatic Stay is issued when a case is filed.  The bankruptcy clerk prepares the order and sees that it is mailed out to all the creditors listed in the case.  The order imposing the stay is also known as the order for relief.  

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A Bankruptcy Trustee is most often thought of as the person that manages the bankruptcy estate.  When someone files for a bankruptcy a trustee is appointed to manage the bankruptcy estate.  You should think of the bankruptcy estate as a separate entity.  If Chris Coons files a bankruptcy then there is a bankruptcy estate for Chris Coons and the case title is usually In re Chris Coons.  

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I think this is one of the most controversial issues I have run into in my more than 20 years practicing law.  It is a confusing problem because there is no simple answer.  You have to look at the facts of each case and then decide what is most cost effective.

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If you are looking for options outside of bankruptcy to help you deal with creditors then I recommend you consider going to a certified credit counseling agency.  In Kansas there is a list of non-profit agencies with the Kansas Banking Commissioner’s Office that help people deal with their creditors.  

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If you are going to file a bankruptcy in Kansas then the most important thing you can do is plan out your case. Your bankruptcy attorney should sit down with you and discuss all of your options between chapter 7 and chapter 13 cases but they should also explain to you if you are in need of some planning to make the case run smoothly or to protect your assets. I once heard a judge say they had never seen too much planning before a bankruptcy and I think your attorney has a duty to advise you to plan out the case.

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Many people find themselves considering bankruptcy to get rid of debts they cannot pay off, but have some debts they may want to keep. Maybe they have a mortgage, or a car loan, or perhaps they have debts they are current on and are hoping to retain some positive marks on their credit. They often wonder if they are required to list those debts on their bankruptcy.  So, do all your debts have to be listed in a bankruptcy?

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At times I will go through bankruptcy opinions by our local bankruptcy Judges so you can see what is going on at the trial court level in our bankruptcy courts.  Bankruptcy cases like this one are very instructive because they outline the elements of a claim and the burden on the parties to provide evidence and what cases the court is looking at in framing the case.

Judge Somers recent opinion here offers real lessons about evaluating whether or not the actions of a debtor rise to the level of fraud.  In this case the debtor, Mrs. Giles, and her husband had a business together and at some point borrowed money from their friends, the Motes, to operate the business.  The loan was secured by a mortgage that was never recorded.  There was a second loan made more than a year later from the Motes as well.

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An objection to confirmation is a response filed in a chapter 13 bankruptcy to an original or amended plan that is filed in the case.  When you file a chapter 13 bankruptcy you fill out a petition, schedules and a number of related documents.  These are really disclosure documents.  They tell everyone involved who you owe as well as your income and expenses.  In addition to those documents you file a chapter 13 Plan.  The Plan tells your creditors, the trustee, and the court what you are planning to do in your case, how much the payments will be, and how long the case is expected to run.

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When you decide to file a bankruptcy it is easy to think of the entire process as something between you and your attorney.  You meet with one of the attorneys usually a few times and draft your case for filing.  After the case is filed you often you only have one court hearing and might meet the bankruptcy trustee for five minutes.   You do a credit counseling class before filing and a debtor education class afterwards.

These are the things you can see.  You are directly involved in them.  What you cannot see are all the people behind the scenes that make the system work.  Like a car, if you look under the hood it suddenly becomes apparent there is a lot more going on.

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I often have people call on the phone to ask me questions about filing a bankruptcy and somewhere near the end of the call they begin to wonder when they can stop paying their bills if they are filing for bankruptcy.   I know that at some point during the call they have gone from exploring the option of filing a bankruptcy to being committed to filing a bankruptcy.

I am always hesitant to tell people to stop paying their debts on that call.  I want to review paystubs, credit reports, court records, and contracts in many cases before I am comfortable telling someone to stop paying their debts.  I also want to ask a lot of questions about your property and your transactions over the last few years.

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It is difficult to know how deep your financial hole is if you still have the ability to borrow money.  I often meet with people that needed a bankruptcy months before they came in but were unaware they were headed to this point.  You can use the power of your credit score to keep you from going under by covering your existing debts with new borrowed money.  People understand that robbing Peter to pay Paul is not a winning strategy but they fall prey to it all the time.

The credit system we have rewards people for making payments on time.  Your credit goes up as time goes on and you make timely payments.  Then you can get more credit.  Then as you make more payments on time on the new debt your credit continues to get better and you get more offers for credit.

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Whenever I meet with a potential bankruptcy client the first duty I have is to try and figure out what services they need and if I can help them.  I usually start by asking basic questions about their lives.  Are they married?  Do they have children?  What do they do for a living?  How much income do they have?  What kinds of debt do they have?

All of these questions only lead to more questions.  I am trying to figure out what is happening with them and how they got into a position where they need to talk to me.  But that is only part of what is going on.

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The most common question I get from clients is what type of bankruptcy I think they should file.  In some cases there is a clear benefit from one type of case over the other.  In many cases both of them will be just fine.

It is possible that someone could want a chapter 7 bankruptcy and not be able to qualify for it.  Sometimes people make too much money or they cannot do a chapter 7 because they have a prior chapter 7 within the last 8 years. It is also possible that you could want a chapter 13 bankruptcy and not be able to qualify for it.  Sometimes there is no money available to make the minimal monthly payment needed to fund a case.

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