It's worth repeating: Common Myths about Bankruptcy.

1.   Bankruptcy is for dead beats.

NO!  Most people I deal with are honest but unfortunate debtors.  They really want want to pay their bills.  But, with the loss of a job, lowered income, retirement, loss of a spouse, divorce,  or other financial issues, hard times can hit anyone.  Bankruptcy is a perfectly legitimate way of handling financial hard times - Congress enacted the Bankruptcy Code to give the honest but unfortunate debtor a "fresh start". 

2.   Bankruptcy is only if I am broke.

 No, bankruptcy can be a tool to keep your house, catch up on mortgage arrears when the bank won't work with you, a way to get rid of credit card debt or high medical bills, and in many instances a way to get rid of a second (or third) mortgage for which there is no equity.  In fact, in most of the bankruptcy Chapters (like Chapters 11, 12 and 13) you cannot be "broke" and you need sufficient income or assets to make your plan payments.

In Chapter 7, you may be without income or assets.

3.   Bankruptcy will take way all of my assets.

NO!  The Bankruptcy Code has a schedule of exemptions, which allow the debtor in bankruptcy to reasonably keep his or her assets.  (click onto my articles on "exemptions")

4.   I will never have good credit again.

That is up to you.  Anyone can rebuild their life, their credit.  You need to pay your bills on time and only obtain the amount of credit you can handle. 

5.    Bankruptcy will make me lose my job. 
The most common answer is "no".

The Bankruptcy Code says that "no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title".  There are a few cases where an employer has been allowed not to hire someone because of bankruptcy status. The Code also says that "a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title."      

6.   All debts are discharged in bankruptcy.

Most are discharged, a few are not such as recent IRS debt or domestic support obligations or debts incurred fraudulently- (click onto my articles regarding "discharge").

7.   The IRS will never go away.

Well, depends on how you look at it.  Stale taxes, meaning most income taxes that are many years old, may be discharged - this requires a closer look to make a determination.

8.    Once I file for bankruptcy, I can never file again. 

Incorrect! click onto my article under "bankruptcy" regarding "timing". 

The Three "P's" of Failure.

What gets in the way of financial success?  First, "Pride".  You are too proud to admit you need help.  You are too proud to admit you may need to consult a professional.  You are too proud to admit you may need to file for bankruptcy.

Secondly, "Procrastination".  You keep putting off trying to solve your financial problems.  Maybe you will win the lottery.  Maybe the credit cards will go away.  Maybe the collection agencies will stop calling. Maybe, maybe, maybe. 

Third, you think of yourself as "Poor".  You keep thinking you just don't have enough money to solve your problems.  You think of yourself as too poor to consult a professional.

How do you reverse these failures?  First it takes a smart personal to admit they need help.  So, sweep that foolish “Pride” away and replace it with your smarter self. Your smarter self admits you need help.

Secondly stop “Procrastinating”, stop putting off until tomorrow what you can solve today (yes, that old adage is so true). 

Third, regardless of the amount of money in your wages, there may be a path to financial freedom.  A good professional can evaluate your financial situation and help you find a path to success.  It may be debt consolidation.  It may be bankruptcy, or it may just be cutting back.  Every situation is different, but there is an answer.  It may not be the answer you want to hear, but there is an answer.

Lesson Learned:  Contact a professional.  Many provide an initial free consultation, so it may not cost you anything to get started!

Arm yourself with real knowledge!

Many people chat with their friends and neighbors to learn of different ways to handle their legal matters.  They also resort to the internet. Those are both good starting points - but remember, your financial situation or your legal situation is unique and certain things in your situation may be different from others.  So, before you make a decision on legal matters, speak with an attorney in your own county or state who is familiar with the legal area that you need to address.  If you cannot find an attorney, contact your state bar association and ask them what resources they have for legal referrals.

In NH, where I practice, the state bar has a legal referral service which will provide you the names of three attorneys in the practice area where you need help. Click here: NHBA - Lawyer Referral Service
This allows you the opportunity to interview a few legal practitioners to not only get a sense of what you need (many provide a free consultation on the first visit - ask if the lawyer will give a a free legal consultation) but also to give you a sense of what is the best "fit" for you and your lawyer.  The "fit" is important, particularly if the litigation is going to be prolonged.  You need to work with someone in whom you can place trust and confidence. If you have not found that - keep looking!

Fighting Back: Wells Fargo assessed $3.1 million in punitive damages for misapplying Chapter 13 debtor's plan payments.

Did I read that correctly?  Yes, Wells Fargo was assessed $3.1 million in punitive damages by the bankruptcy court for misapplying Ch. 13 payments!

In an extensive analysis and opinion, Bankruptcy Judge Elizabeth W. Magner assessed $3,171,154.00 against Wells Fargo in punitive damages, along with litigation costs awarded to debtor's counsel, "to deter Wells Fargo from similar conduct in the future".  See  Jones v. Wells Fargo Home Mortgage, Inc. (In re Michael L. Jones), Ch. 13 Case No. 03-16518, Adv. Pro. No. 06-1093 (Bankr. E. D. La. 4/5/12)(Elizabeth W. Magner, United States Bankruptcy Judge [Chief Judge]).

Apparently, Wells Fargo failed to properly apply post-petition payments made by Chapter 13 debtors and failed to disclose the assessment of certain post-petition costs and fees. And, apparently, they picked on the wrong debtor and wrong debtor's counsel who fought them for years until they won. While it is likely that Wells Fargo will appeal this decision, a betting person would also predict that, down the road, Wells Fargo is going to end up paying a significant sum of money for this conduct.

The full decision should be posted shortly on the Court's web site:  Click here: Judge Elizabeth W. Magner - "Section A"

Fighting Back!

A couple filed for Chapter 7 relief under the bankruptcy code and discharged their debts.  Apparently ignoring all of this, Bank of America pursued the Humphreys after the bankruptcy case for a debt that was discharged, which violated the discharge injunction of 11 U.S.C. Section 524 of the bankruptcy code.  The bankruptcy court found that the bank contacted the Humphreys 38 times - even though the Humphreys and their lawyer told the bank to stop, that the debt had been discharged in bankruptcy. The Humphreys did not take this lightly, but rather went back into bankruptcy court and asked for relief.  The bankruptcy court judge awarded the Humphreys the legal fees they incurred ($2500) and awarded them an additional $10,000 for the distress the situation caused.

See In re James C. Humphrey, Jr., and Shannon L. Humphrey, 2012 Bankr. Lexis 1113, (Bankr. M.D. Fla. 3/24/12) (Arthur B. Briskman, Bankruptcy Judge).

Here's a summary of the case:

In re: JAMES C. HUMPHREY, JR. and SHANNON L. HUMPHREY, Debtors.

Case No. 6:10-bk-17756-ABB, Chapter 7

UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF FLORIDA, ORLANDO DIVISION

2012 Bankr. LEXIS 1113

March 14, 2012, Decided

OVERVIEW
: Chapter 7 debtors filed a motion to reopen their bankruptcy case and a motion seeking sanctions against a bank national association ("bank"), claiming that the bank violated 11 U.S.C.S. § 524(a) when its agents contacted the debtors after a debt they owed the bank's predecessor was discharged pursuant to 11 U.S.C.S. § 727 and demanded that the debtors pay the debt. The court held a hearing on the debtors' motion for sanctions.  The debtors declared bankruptcy in October 2010, that they listed a home loan servicing business as a secured creditor that was owed $153,598. The court sent notice of the debtors' bankruptcy case to the business; however, the business did not did not seek relief from the automatic stay or otherwise make an appearance in the debtors' case, and the debtors received a discharge pursuant to 11 U.S.C.S. § 727 in January 2011. A bank acquired the mortgage on the debtors' property and it agents contacted the debtors on 38 occasions after they received their discharge, demanding payment. The court found that the bank violated the discharge injunction that was imposed pursuant to 11 U.S.C.S. § 524(a) and caused the debtors emotional distress, and it awarded the debtors $10,000 in damages and 2,500 in attorney's fees. The bank's agents continued to contact the debtors after the bank was informed by the debtors and their attorney that the debt was discharged, and in doing so they willfully and intentionally violated the discharge injunction and acted in bad faith. The debtors' damages included significant aggravation, emotional distress, inconvenience, and attorney's fees.
DECISION: The court found that the debtors were entitled to an award of actual damages pursuant to 11 U.S.C.S. § 105(a) and the court's inherent power to hold parties in contempt of court, and it awarded the debtors $12,500 plus interest and enjoined the bank from taking any further collection action against the debtors.