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“Bankruptcy” is a legal proceeding in which a person who cannot pay his/her bills can get a “fresh start”. In Texas, the bankruptcy code is a federal law, meaning it applies uniformly nationwide. Filing for bankruptcy immediately stops creditors from collecting debts from you until the debts are sorted out through an “automatic stay.” Each state, as well as the federal government, have enacted legislation that dictates what property debtors can keep through the bankruptcy process. These laws are known as “exemption laws”.
Exemption Laws
An exemption limit applies to any equity you have in the property. Equity pertains to the difference between the value of the property versus what is owed of the property. If the property is secured by a loan, such as a house or a car, you may choose to keep making payments on the loan and keep this property through bankruptcy.
Texas exemptions:
- For homestead, the property cannot exceed 1 acre in town, village, or city or 100 acres (200 acres for families) elsewhere; sale proceeds exempt for 6 months after the sale which need not occupy if not acquire another home. Home declaration may also be filed.
- For personal property, this includes athletic or sports equipment, home furnishings, food, clothing, jewelry (not to exempt 25% of total exemption), 1 motor vehicle per member of the family who holds a driver’s license, livestock, and pets.
- For insurance, life insurance current value if the beneficiary is a debtor or debtor’s dependent. It also includes retired public school employees group insurance, Texas employee uniform group insurance, and Texas state college or university employee benefits.
- Pensions of law enforcement officers survivors, municipal employees, police officers, retirement benefits to tax-deferred, state employees, and teachers.
- Public benefits such as medical assistance, public assistance, unemployment compensation, and workers’ compensation.
- Tools of the trade such as farming or ranching vehicles and implements.
- Earned but unpaid wages or commissions to 75%
Chapter 7 Bankruptcy
This is a “liquidation” where the trustee collects all your assets which are not exempt. The trustee will sell the assets and pay the debtor. The net proceeds are then distributed to the creditor with a commission taken by the trustee overseeing the distribution. Alimony, child support, fraudulent debts, student loans, and certain items charged cannot be discharged in a Chapter 7 bankruptcy. In most cases where the debtor has a large credit card debt and other unsecured bills and very few assets, Chapter 7 is able to completely eliminate all of these debts.
To declare bankruptcy, you must sign a voluntary “reaffirmation agreement” should you decide to keep your house, car, or furniture. If you do so, you cannot wipe-out that debt again for eight years. You will still owe that debt and obligated to continue paying it as you did before filing bankruptcy. In order to reaffirm the debt, you must make it current, which means, if you are months behind, you need to pay the back payments which are due. You can selectively state what you wish to keep and give back to their respective creditors. Reaffirmation agreements can be set aside during the earlier 60 days after the filing date or upon the court’s order of discharge.
Chapter 11 Bankruptcy
Often called the “reorganization bankruptcy”, it is for businesses that want to continue operating but need time to restructure their finances. Filing for bankruptcy can be done voluntarily or forced on a business if three or more creditors file a bankruptcy petition with the bankruptcy court. After filing, the creditors are temporarily prohibited from taking any action. The business has 4 to 18 months to come up with a plan of restructuring. After that, the creditors can propose their own plan of reorganization. A plan is a contract between the debtor and creditor on how the business will operate to pay off its financial obligations.
Chapter 13 Bankruptcy
Sometimes called the “wage earner’s bankruptcy”, it is for individuals with enough income to repay all parts of their debts an alternative to liquidation. This is for those who can afford to pay their debts but unable to pay immediately. You can use this to prevent foreclose of your house, update missed mortgage payments, pay back taxes, and keep valuable non-exempt property. If you follow your payment plan, all of your dischargeable debt will be released at the end of the plan. The amount to be repaid depends on the debtor’s disposable income. This is generally used by individuals who want to keep secured assets such as a home or car. It allows them to make up for their overdue payments over time and reinstate the original agreement.
Getting a Lawyer
While you can proceed to file for bankruptcy alone, availing the services of an experienced lawyer will be a great help to you because the bankruptcy laws can be quite complicated and costly. We, at Allmand Law Firm, PLLC, are well versed in bankruptcy cases and will keep you informed of everything you need such as the types of bankruptcy options and the chapter that best fits your situation. We may also help with impending foreclosures and other proceedings even after bankruptcy. Call us now for a free legal consultation.
The post Bankruptcy Chapter 7, 11, & 13 in Texas appeared first on Allmand Law Firm, PLLC.
June 29, 2020
Marketplace
Many economists and bankruptcy lawyers expect a wave of bankruptcies coming this year.
Giant bankruptcies of companies that owe more than $100 million, are up 40% from a year ago, which means they are up 120% from 2018. Chapter 11 bankruptcies of all kinds have increased 20% since last year. This is obviously traumatic for the people who work at those companies but there is a silver lining.
“It’s an overstatement to say that bankruptcy is this deeply undesirable thing,” said Jared Ellias, professor of law at UC Hastings College of Law.
“One of the great things that happens after bankruptcy is a company leaves, and they’re hopefully positioned to thrive,” he said.
The post COVID-19 economy is going to be very different and a lot of businesses will need to radically reinvent and reinvest in themselves in order to adapt. Chapter 11 bankruptcy lets companies do that. Which is why Ellias and a group of academics are concerned that if there are too many bankruptcies, the courts might get overwhelmed and companies won’t get the help they need.
“When a company is in financial trouble, they can’t invest, they can’t hire, they can’t give people pay raises, they can’t do the things that businesses need to do to be attractive places to work,” Ellias said.
So if you slow down the process of transformation, it slows down the entire economy.
“There have been proposals to bring back some retired bankruptcy judges, recently retired bankruptcy judges, and you also would need to add personnel at the clerk’s office level as well,” said Robert Keach, an attorney who specializes in business restructuring and insolvency at the Bernstein Shur law firm.
Congress also made it a lot easier, faster, and cheaper for small businesses to go through the bankruptcy process through reforms in 2019 and through the CARES Act, according to Keach. But judges take time to hire, and there is only so much you can do, he said, so a lot will depend on just how bad the bankruptcy wave will be.
The IRS Won’t Call You About Your Stimulus Money
IF YOU GET A CALL FROM SOMEONE SAYING THEY ARE FROM THE IRS – STOP!!!! IT IS A SCAM!!!!
June 24, 2020 – The Federal Trade Commission (FTC) issues a warning that scammers are pretending to be from the government. They can set their phones to appear on caller ID that the call is coming from the government. NEVER give out any personal information without confirming who is calling and why.
The Scammers pretend to be from the IRS, Medicaid, Medicare, Social Security.
Look, scammers like to pretend to be from the government to get your money or information. They’ll say they’re from Medicaid or Medicare, offering help getting medicine or equipment, or asking to “verify” your information. They pretend to be from the Social Security Administration, saying there’s been fraud or another problem with your Social Security number and — again — needing to “verify” your number. And scammers love to say they’re from the IRS demanding payment or they’ll arrest you.
But remember: if you get a call or email from the IRS or any government agency asking you for personal information or money, that’s a scam. Hang up the phone or delete the email.
To check the status of your coronavirus payment, visit irs.gov/coronavirus. Learn about scams related to COVID-19 at ftc.gov/coronavirus/scams. And, if anyone tries to trick you into giving up your information — or if you’ve already experienced a scam — report it to the FTC.
MUSINGS FROM DIANE:
Your phone rings, the caller id has a name and number of a federal agency. You immediately panic. You give the caller any information they want, with the hope that whatever problem they are referring to will go away. You just opened the door for financial fraud which could last years or decades.
Technology provides scammers with tools to fake a legitimate phone number (like the IRS). This technology helps the scammer clone your attorney’s own phone number. Email addresses are spoofed thousands of times a day. Many times from people or companies in other countries. You heard about the scams coming from Nigeria (just one of a many countries) purporting to be from your best friend who desperately needs some money. They are traveling and lost their wallet. All are scams. All are difficult to diagnose.
Your only defense – use your common sense and check out the caller. Never use the same phone number they called on or a phone number or email they gave you. Look up the agency (say IRS) on-line and call them directly. There are resources that help you check out scammers. The Federal Trade Commission, the Consumer Financial Protection Bureau, your local Attorney General’s Office and local consumer protection agencies. Be careful out there.
How Can I Help You?
The post The IRS Will Not Call You About Your Stimulus Money – It Is Scam appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
ALERT FOR SMALL BUSINESS OWNERS NEEDING PPP LOANS
Law suit against Ponte Investments, LLC, promoted their “SBA Loan Program” and website “SBAloanprogram.com
April 17, 2020 – Alert from FTC for small business owners needing PPP loans
This is an alert for small business owners who are looking to apply for the Paycheck Protection Program (“PPP”) loans offered by the U.S. Small Business Administration (“SBA”). The loans help alleviate the economic impact of the Coronavirus pandemic, but there are bad actors trying to get business owners to apply for the wrong program. Today, the FTC announced that it filed a case against a company that allegedly claimed to offer PPP loans — but, in reality, the company is not affiliated with the SBA and, the FTC says, it has been deceiving hundreds, if not thousands, of business owners.
According to the FTC, the defendants, Ponte Investments, LLC, promoted their “SBA Loan Program” and website “SBAloanprogram.com” by calling business owners and following up with emails that say things like “We are the SBALoanProgram.com and as mandated by the SBA, getting approved is easier than ever!” The callers claim to be representatives of the SBA working with the business’s bank and urge the business owners to apply for a PPP loan right away.
If you’re a business owner, go to sba.gov/coronavirus to find information about PPP loans. Once at sba.gov/coronavirus, go to Click here to learn more about available SBA loan and debt relief options.
Sign up for emails from the FTC:
MUSINGS FROM DIANE:
As people and technology gets smarter, the scum of the earth (frauds) also get smarter. They take advantage of anyone looking for help, a quick fix or just to be their advisor. No one is immune. Not the young. Not the educated. Not the professional.
The problem with chasing and stopping the frauds is they are slippery. They don’t care if they go to jail. They don’t care that they harm people and businesses. They are quick to jump on any opportunity (like the rebates funds from the federal government). They take advantage of their anonymity.
My point? The best defense is a good offense. Do not trust anyone, even those that your best friend referred. Don’t assume that because they are “big companies” they will not mislead you (just look at all the Wells Fargo scams). Do your own due diligence. If it sounds too true, IT IS!!
How Can I Help You?
The post COVID-19 Scams – Warnings from FTC appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
June 25, 2020
Forbes
There are increasingly urgent signs that an unprecedented wave of student loan defaults could be arriving within a matter of months. A cratering economy and expanding pandemic are about to collide with the expiration of critical temporary student loan relief programs, and the end result could be catastrophic.
Here’s what’s going on.
The Economy Continues To Stagnate Unemployment remains at levels unseen since the Great Depression, with no signs of dramatic improvements. Last week, yet another 1.5 million Americans filed for unemployment benefits. Nearly 50 million Americans have filed for unemployment benefits over the past three months, and while this week’s numbers are far lower than initial jobless claims filed in March, the economy is not showing any signs of dramatic or rapid improvement. The Federal Reserve recently indicated that it expects unemployment to remain high through the end of the year and beyond.
The Pandemic Appears To Be WorseningWhile the stay-home orders of March and April were successful in slowing the spread of the Coronavirus, those trends have now been reversed. Several states with large populations — Florida, Texas, and California — are seeing record increases in daily confirmed cases of Covid-19. Those three states contain over a quarter of the entire population of the United States. And Coronavirus cases are also increasing in two dozen other states, as well. Hospitalizations are also increasing in many localities. It is becoming quite clear to health experts that the pandemic is far from over, and we may be entering a new, even worse phase of the outbreak.
Federal Student Loan Relief Under The CARES Act Ends SoonIn the wake of the pandemic and economic collapse, Congress passed the CARES Act. Although the implementation of the CARES Act has been hugely problematic, the stimulus bill has provided critical relief to student loan borrowers in the form of an automatic suspension of payments and interest for all government-held federal student loans.
That suspension, however is scheduled to expire on September 30, 2020 — less than 100 days from now. Over 40 million student loan borrowers will be hit with student loan bills by October, and many will be unable to afford their payments. Others who may be directly impacted by Covid-19 may not be able to manage the act of making a payment, even if they could afford to do so.
Temporary Private Student Loan Relief Expires ImminentlyCongress limited the student loan relief under the CARES Act to government-held federal student loans. This effectively left millions of private student loan borrowers without any relief at all. However, several states stepped in to negotiate voluntary relief programs with dozens of private student loan lenders and servicers. The resulting multi-state pact provided millions of private student loan borrowers with temporary relief in the form of suspended payments and a cessation of negative credit reporting.
That temporary relief, however, was typically limited to 90 days. Private student loan borrowers who took advantage of those relief options in March or April may have no other options when that relief imminently expires. Since private student loans are not eligible for income-driven repayment programs or long periods of hardship-based forbearance, defaulting will be an inevitable outcome for many borrowers.
Bottom LineAll signs point to a looming catastrophe for millions of student loan borrowers. To avoid disaster, Congressional action is likely required.
The Democratic-controlled House of Representatives recently passed the HEROES Act, which would extend the CARES Act’s student loan provisions by a full year to September of 2021. But Senate Republicans have rejected this bill. A coalition of over 60 organizations have also called on Congress to extend the CARES Act for student loan borrowers and forgive a substantial amount of student loan debt, although Senate GOP leaders have shown no interest in such broad relief to date.
Without a bipartisan solution, student loan borrowers will start falling into default at an ever-increasing rate. Time is running out.
…But the Car Still Has to Pay. When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments. But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay. That’s because the car finance company is […]
The post After bankruptcy….the car still has to pay! by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed - .
…But the Car Still Has to Pay. When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments. But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay. That’s because the car finance company is […]
The post After bankruptcy….the car still has to pay! by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed - .
…But the Car Still Has to Pay. When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments. But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay. That’s because the car finance company is […]
The post After bankruptcy….the car still has to pay! by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed - .
The federal government has finally offered some clarity on how mom-and-pop businesses can avoid repaying their bailout loan—a major sticking point in the Paycheck Protection Program.
In the past month officials in the Small Business Administration and the Treasury Department have worked with Congress to make much-demanded changes to the law, which culminated in the PPP Flexibility Act signed by President Donald Trump on June 5.
With all remaining PPP loan applications expiring next week—June 30 is the last day to apply—here are the changes small-business owners need to know to receive forgiveness on current or future loans.
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The amount one is required to spend on payroll has shifted
The first iteration of the PPP loan required small-business owners to spend 75% of the loan money they received on employee payroll before it could be considered for forgiveness. After an outcry from small-business owners, who considered the stipulation restrictive in light of a host of other operating costs, the revised PPP loan shifts that requirement to 60%.
Furthermore, even if a borrowing small-business owner uses less than 60% of the loan amount on payroll, he or she will still be eligible to have a portion of the entire loan forgiven. The other expenses that can be funded from the remaining 40% of the loan money and still be forgiven are rent, mortgage payments, utilities and interest on loans. Expenses outside this realm are not forgiven.
There is a new PPP loan forgiveness 'safe harbor' rule
This change in the loan terms protects businesses that were unable to hire employees back to Feb. 15, or pre-Covid-19, levels from being penalized on their loan amount, as payroll is tied directly to the employee amount an owner can or had hired before the shutdown. Businesses have been given an extension to Dec. 31 to hire back employees they had on staff before February of this year. Basically the "safe harbor" rule applies to those small businesses that are still shut down. They can apply for a full PPP loan and not feel forced to hire back staff when they are not open.
The rule has a second component. Businesses that hire employees back on salaries lower than before the pandemic—because of a decline in business activity or a lack of revenue—will not be penalized on their loan amount as long as they can document their drop in full-time employee salary was related to Covid-19 restrictions.
The requirement to use funds within eight weeks of receiving the loan has been moved to 24 weeks
This is another important change to the program that could have ramifications on how much forgiveness is allocated to small-business owners. Borrowers who applied for and received PPP funds after June 5 will have 24 weeks (six months) until they need to spend the money. Those who received money before June 5 will still have eight weeks from the start of the loan to spend the money if they choose so, as they might find it advantageous to get it off their books. These borrowers are offered the flexibility to receive the 24-week extension.
The repayment terms have been extended too
Small-business owners who received PPP money on or after June 5 will now have five years to repay the amounts of the PPP loan that are not turned into a grant through the forgiveness provisions. Those borrowers who received PPP money before June 5 must pay their nonforgiven portions of the loan back within two years, although they can work with the bank that provided the loan to get an extension.
PPP Forgiveness Application 3508EZ ( Revised 06.16.2020) by Janon Fisher on Scribd
Furthermore, the SBA has amended the law to allow deferments on payments on principal, interest and fees associated with PPP loans to the date the SBA remits the loan to the bank. Previously the period was six months from the date of the loan. This amendment extends the clock from ticking too quickly on when a borrower is expected to pay back these costs.
SBA offers 'EZ-Application' for eligible small- business owners
This three-page PPP loan application simplifies the paperwork process and is available to small-business owners who are either self-employed or have no employees, did not reduce the wages of their employees by more than 25%, or can prove they experienced a drop in business activity because of Covid-19 and did not reduce their business wages by more than 25%.
Letter
June 3, 2020
International Business Times
By Amy Fontinelle
Declaring bankruptcy is never pleasant, but for small businesses it's often been disastrous. Filing under chapter 11 -- the method that allows a firm to re-organize -- was designed for large corporations. Technically, a small firm could do it, but the process was lengthy, costly, and creditor-friendly. As a result, insolvent small businesses often had to file for chapter 7, which meant closing shop entirely.
But now there's a new way to declare bankruptcy, a more debtor-friendly alternative: subchapter V. Created by the Small Business Reorganization Act (SBRA) of 2019, it became effective February 19, 2020. And then, a month later, it got even better, thanks to the CARES Act, which tripled the qualifying debt limit under this option.
Now, if you're a small business owner with less than $7.5 million in debt, and if you can demonstrate that staying open will generate enough money to repay your creditors over three to five years, you'll have a better chance at continuing to support yourself and serve your customers.
Subchapter V: Are You Eligible?The SBRA originally made subchapter V -- so-called because it's a clause under chapter 11 -- available to small businesses whose secured and unsecured debts combined totaled no more than $2,725,625. When the CARES Act became law on March 27, 2020, that limit increased to $7,500,000. This higher limit is set to expire after March 26, 2021. At least half of the debt must be business (not personal) debt.
One requirement to file for subchapter V is that the debtor (that is, you) be currently engaged in commercial or business activities. However, if your operation closed down when pandemic-induced stay-at-home orders went into place, here's the good news: Courts so far have taken a liberal view, ruling that businesses in similar situations are eligible to file.
When you file, you'll incur a $1,167 case filing fee and a $550 administrative fee. The court may allow you to pay in installments within 120 days of filing (roughly $430 per month) or 180 days of filing (roughly $286 per month). You may also incur fees for professionals such as attorneys, accountants, appraisers, and auctioneers.
How Subchapter V Works: Creating Your Reorganization PlanSubchapter V is unlike a regular chapter 11 case in that it doesn't require an impaired class --like a creditor who won't receive everything you originally owed them -- to accept your reorganization plan. The bankruptcy court can approve it without their acceptance as long as your plan is fair and equitable.
"Fair and equitable" means your plan must provide for all of your disposable income to go toward repaying your creditors over the next three to five years. You'll be able to use some of your income to support yourself, support any dependents, and operate your business. You won't be taking any vacations, but you won't be homeless and you might not have to lay off your employees.
Your reorganization plan will include the information that would normally be included in a disclosure statement under regular chapter 11. This information includes a brief history of your business operations, a liquidation analysis, and financial projections for your business showing how you'll repay your creditors.
A liquidation analysis is a good faith estimate of what your business assets could be sold for in a chapter 7 bankruptcy where you closed your business. The court will want to see that if you choose subchapter V, your debtors will be better off than if you liquidated under chapter 7.
Unsecured creditors can really lose out in a liquidation bankruptcy, and even secured creditors may not recoup what they owe since it can be challenging to get the full value for assets sold in a distress sale. That said, if your business continues to struggle during your three to five years of payments, you may end up liquidating certain assets to pay your creditors, or even converting your case to chapter 7 and liquidating everything.
Filing for Subchapter V: Trustee SupervisionFiling for any type of bankruptcy provides an automatic stay that requires creditors to leave you alone. Once the bankruptcy court discharges your debts., creditors cannot try to collect them. You can't be sued or held personally liable for them. Discharge occurs either upon confirmation of a consensual plan -- before you start making payments to creditors who have agreed to your plan, or after you make all your payments under the plan, for a nonconsenual plan.
After you file, the U.S. Department of Justice will appoint a trustee to supervise your bankruptcy process. You'll give the trustee copies of your most recent tax return, statement of operations, cash flow statement, and balance sheet. They will help with your reorganization plan and attend your key court hearings.
If your creditors approve your plan, the trustee's job ends there. If not, the trustee will oversee the entire three- to five-year repayment process. The trustee will not take control of your assets and cannot sell your assets, but the trustee will collect your payments and distribute them to your creditors. They may also inspect your business premises, books, and records if they give you reasonable advance notice.
Who Should File Subchapter V?Subchapter V offers many benefits to small businesses that are struggling under too much debt. Of course, if you can work something out with your creditors without filing for bankruptcy, that's always the preferable course, saving you a lot of money. Subchapter V is for when your creditors won't budge, because the court can approve your case against their will. It's also for when you've pledged your home as collateral for a business loan you can't pay and you don't want to lose your home.
If you think your business has a good chance to become profitable again and you don't want to close down for good, talk to a bankruptcy attorney about opening a subchapter V case.
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