DIVORCE AND BANKRUPTCY

This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

Divorce is one of the leading causes of bankruptcy filings. In today’s economy, not only are courts dissolving marriages, they are dividing assets, distributing debts, and awarding support obligations between the divorcing couple. The orders that a court enters with regard to the distribution of assets and liabilities have a profound impact on the bankruptcies subsequently filed by divorced individuals.


For example, both parties may be jointly liable for a car loan. In the course of a divorce proceeding, the court may order that the husband be responsible for the entire car loan, or for a particular portion of that loan. How the court words its order can determine whether the husband subsequently filing for bankruptcy can actually discharge that loan or the deficiency resulting from repossession.

If the court orders the husband to pay the car payment to the wife as part of a domestic support obligation, the husband would not be able to discharge that debt in his subsequent bankruptcy because domestic support obligations are not dischargeable in bankruptcy. However, if the Court orders that the husband be solely liable to the automobile financing company for the loan, then the husband would be able to discharge that debt in a subsequent bankruptcy.

Consequently, divorcing couples need to retain divorce attorneys who have knowledge of bankruptcy law as it relates to the distribution of debts and to awards of domestic support obligations. At Pesner Kawamoto Conway, PLC our attorneys are experienced in both bankruptcy law and in domestic relations law; and we provide comprehensive advice and guidance to divorcing parties who may need to subsequently seek the protection of the bankruptcy court

Deborah Winstead

BANKRUPTCY IS SANCTIONED BY THE OLD TESTAMENT---LEVITICUS, CH. 25

Infrequently, a client will consult with me in a mixed emotional state.  On the one hand, the client has been humilitated by his creditors, being subject to numerous harassing phone calls, written demands and judgments.  Yet at  the same, the client suffers from extreme shame that he or she is about to file for bankruptcy and seek forgiveness of his/her debts.  Many of these clients have stated that they feel bankruptcy is immoral. 

Logically, insolvency frequently results from tragic life events that no one can foresee or which are foreseeable but extremely unlucky.  Moreover, for those instances in which the insolvency results from reckless financial behavior one can rationalize the bankruptcy relief sought because insolvency generally results from a lender too willing to lend or too willing to exercise power over another and a borrower too nearsighted to contemplate the consequences.   Although I personally tend to be persuaded by reason, I recognize that many are influenced by their religious upbringing.  For the latter, I refer them to Leviticus, Chapter 25 in which the Bible states:

And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof; it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.  . . . Ye shall not oppress one another . . . And if thy brother be waxen poor, and fallen in decay with thee; then thou shall relieve him: yea, though he be, a stranger, or a sojouner; that he may live with thee.  Thou shalt not give him thy money upon usury, not lend him thy victuals for increase.  . . . And if thy brother that dwelleth by thee be waxen poor, and be sold unto thee; thou shall not compel him to serve as bondservant.  But as an hired servant, and as a sojourner he shall be with thee, and shall serve thee unto the year of jubilee; and then shall he depart from thee, both he and his children with him, and shall return unto his own family, and unto the possession of his fathers shall he return.  For they are my servants, which I brought forth out of the land of Egypt: they shall not be sold as bondsmen.  Thou shall not rule over him with rigour; but shalt fear thy God.

Again, psychologically, I feel that many consulting with me have the shoe on the wrong foot.  It is immoral to enslave or oppress.  It is not immoral to flee oppression.

This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

HOW BANKRUPTCY WILL AFFECT MY LIFE

It is among the most pressing question that clients have when they first consider filing for bankruptcy, and the fears often far exceed the realities. Bankruptcy carries with it a stigma that lingers even as the nation and the economy faces its most difficult struggles since the 1930's, but it has been and remains a legal and necessary part of a vital economy that has saved countless families and even some of the largest corporate organizations in the world.

Bankruptcy is not a decision to be made lightly, but understanding both how it can impact and improve your life should be a vital part of the decision. At the law offices of Pesner Kawamoto Conway, PLC, in McLean, Virginia, our attorneys have been helping individuals and businesses come to informed and personalized decisions about bankruptcy for decades.

An End and a New Beginning

For many clients the decision about whether to file a Chapter 7 or Chapter 13 bankruptcy comes down to a measure between what life is like now and what it will be like under the protection that bankruptcy affords. We hear clients describe their current situation in a lot of different ways, such as:

• Constant pressure from creditors and collections agents

• A fear of every phone call and every knock at the door

• Helplessness in the face of massive debt, out-of-control interest rates or foreclosure

• Sleepless nights spent thinking about money and harassment from creditors

• Fights with spouses about the weakening state of family finances

• A direct result of a divorce or other change in family status

Bankruptcy isn't a fix to all problems, but for many families it's the restart or opportunity to catch up that they most need. With a process that is far less complicated than many people expect, bankruptcy can have immediate impact, including:

• An immediate end to creditor harassment

• The opportunity to build a payment plan that matches your ability to pay

• Exemptions that may allow you to keep your home and key assets while eliminating other debt

• A sense of taking back control of your finances and life

This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

PROCESS OF BANKRUPTCY

Many of our clients imagine bankruptcy as a long and drawn out process full of judgments and embarrassing arguments with creditors. The reality is significantly different, and among the most common statements we hear from our former clients is: that was it?
We understand that the decision to file for bankruptcy is a serious one that can have both immediate relief and long term consequences. It is not something we ever recommend clients do because it is quick or easy, but because it is the right thing, but it is also important to realize that there is often a smooth process that we can put you on so that within only a few months you are back on the course toward a better financial future.

In Virginia and Maryland, contact the attorneys at the law office of Pesner Kawamoto Conway, PLC, for reliable, personalized and confidential bankruptcy counsel.



An Established and Reasonable Process

In very simple and general terms, here is the sort of process you can often expect when filing for Chapter 7 or Chapter 13 bankruptcy:

• 3 to 5 days after filing notice is sent out to creditors

• Creditors are no longer permitted to seek collections against debt — any harassment ends

• A trustee is appointed

• 45 days after the filing of the Petition there is a creditors meeting with the Trustee to verify your petition, which may last as little as 15 minutes

• Usually within 90 days of filing the petition, the bankruptcy court discharges your debt or in the case of a Chapter 13, approves your plan.



This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

BANKRUPTCY FOLLOWING DIVORCE

There are a lot of situations that can lead an individual to a financial decision involving bankruptcy: excessive debt, foreclosure, being laid-off from work or a major medical expense. One of the more common causes of serious financial stress which is not often talked about is a dramatic change in family status. For many clients an expensive and painful divorce is a major contributor to bankruptcy. At the law offices of Pesner Kawamoto Conway, PLC, our lawyers have significant experience working with Virginia and Maryland clients who are facing financial hardship because of a divorce. We can work with you to explore the options available and understand your rights, by putting decades of combined experience and a commitment to client service behind your case.
The Financial Strain of Separating a Household

A divorce may be unavoidable, but so too are the expenses and costs associated with ending a marriage. Particularly if you were part of a two income marriage, the financial strains that can follow as a result of a divorce can be significant, and if you are expected to contribute financially for support or take on the debts of your former spouse, then you may have to consider more dramatic financial remedies.

Our attorneys work with clients who are facing a range of financial challenges, including those who have separated from a former spouse. We offer experienced and client focused solutions designed to help you repair and rebuild.


This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

ENDING CREDITOR HARASSMENT

Collections agencies employ a range of tactics to collect on outstanding debts, not all of them ethical, not all of them legal. For many families and businesses facing difficult times, creditor harassment is a constant source of significant stress. The fact that some people have to make a choice between paying down a debt and buying groceries or fixing the car doesn't help to stem the tide of calls. It can get to the point that people feel frustrated and even helpless to stop a financial situation sliding out of control. At Working with clients in Virginia and Maryland, we are dedicated to providing experienced, effective and client focused solutions.

A Pathway to Rebuilding Your Financial Life

It can be embarrassing to have the phone ringing every night with one collector or another demanding money you don't have or leaving threatening messages. We see clients from all walks of life, of all professions and who all, for a variety of reasons, have come to be overwhelmed by unsecured debt, loans or bills.

If you do decide to pursue a bankruptcy, our lawyers can take immediate action to end collections calls and creditor harassment from:

• Credit card companies

• Collections agencies

• Hospitals

• Mortgage lenders

• Foreclosure attorneys

• Banks and personal loans

This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

STRATEGIC DEFAULT AND HOMEOWNERSHIP

Yesterday, I listened to "Meet the Press."  The guests were Dr. Alan Greenspan and Former Treasury Secretary Henry Paulson.  The commentator asked these former government officials if they were concerned that so many homeowners are "unwater" on their home mortgages, especially when the fair market value of the home is less than 75% of the mortgage amount.  In unison the two said that most homeowners will continue to pay their mortgages out of shame or emotional attachment to their homes.  These bank representatives believed that the homeowner reluctance to default was a good thing.  They are merely interested in lender solvency and profitability. 

I, personally, was appalled.  It makes much more sense for homeowners in financial trouble to deed their homes back to their lenders than to live in unaffordable dwellings for many years.  The opportunity costs imposed by staying in unaffordable mortgages for the homeowners are just too high.   Homeowners may have to forego better jobs in other regions of the country.  They may forego adequately saving for their children's educations.  They may defer medical procedures that would prolong their lives or increase their happiness.  They may forego living comfortably and should consider renting instead.  Usually the dwelling next door has the same floor plan and may rent for half the current mortgage payment.  

All too often debtors consider how their actions may affect "society" or their credit ratings.   Instead of looking out for themselves, debtors may assume that the values espoused by elites are right for them.  They aren't.  Debtors should pause to think how lenders have affected them.  In days of yore, debtors actually had usury laws to protect them from high interest rates.   Laws clamped down on risky lending and kept capital located closer to home.   One did not need a 1-800 number to speak to his bank.  In my parents' generation (children of the Great Depression) borrowing for anything was discouraged.  They paid in cash.  Now I receive in the mail daily credit card offers.  In the aughts, Lenders somehow made us feel that older generational habits of thrift were antiquated and that we were "Americans" and did not have to delay the gratification of our desires.  The loan officers, afterall, did the numbers and said we could afford it.  It has now all come home to roost

My frustration is that the bankers and media do not acknowledge in personal terms the harm that their lending practices have caused.  Everyone wants Toyota to fix its cars.  No one disputes that a manufacturer should fix its defective accelerators or  brakes.  Shouldn't lenders do more to fix their defective loans?  How about writing off some principal?

Martin Conway


This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

RE-SCHEDULING CREDITORS' MEETINGS--- HARDER THAN YOU THINK

Clients often want to reschedule the creditors' meeting.  The date and time of the meeting are established by the United States Trustees Office, without regard to the debtor's schedule.  Since the creditors' meeting date is the start of a number of other deadlines--exceptions to discharge, the filing of proofs of claims and the objections to exemptions--the United States Trustees Office discourages changes.  One literally has to get a doctor's excuse or a note from the employer stating the debtor will be unavailable to attend the meeting.  Even if you attend the re-scheduled date, all creditors must receive a notice of the re-scheduled date and strict compliance is required.  Basically, we will not attempt to re-schedule your date unless the required documentation is in hand.  This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

Martin Conway

LIVING TRUSTS AND CREDITORS/BANKRUPTCY

Recently, I went to a financial planner.  The planner, who had a referral network with several estate planning attorneys, informed me that a living trust would give me added protection from my creditors.  Being a friendly listener, I did not correct the planner assisting me.  While it may be true that in a few states a living trust will protect your assets from your creditors, this is usually not the case.  When you settle your own trust and have powers over the trust to revoke it at any time or change the beneficiaries, etc., it is known as a settlor trust.  In Virginia, such a trust will not protect your assets from your creditors, and property in such a trust becomes part of the bankrupcty estate upon settlor's filing for bankruptcy.  Again, you should consult with an estate planning attorney familiar with creditors' rights before embarking on an asset protection strategy that does not provide the expected protection.

Martin Conway


This blog is not intended to render legal services to the reader, including advice about bankruptcy or taxes. Consult with a lawyer concerning the specific application of the law to your unique circumstance.

FOR FREDDIE MAC A SHORT SALE IS AS DETRIMENTAL AS BANKRUPTCY

Frequently, clients have asked me in the past whether a short sale was as detrimental to their credit history as a bankruptcy. I have always told them that it was. A foreclosure is worse. Recently, I decided to prove what I knew by intuition. Here are the Freddie Mac Guidelines for "Caution Mortgages", which was produced in April 2009. Freddie Mac and its sister Fannie Mae control 95% of the mortgage market. Freddie says a borrower must have re-established his/her credit history for 48 months after a short sale, deed-in-lieu or Chapter 7 bankruptcy. A borrower must have a rehabilitated credit history for 60 months following a foreclosure. Finally, for those clients who seek to resolve their debts through a non-bankruptcy process, Freddie still requires the borrower to have a clean credit history for 48 months.  Basically a Chapter 7 bankruptcy may be the way to go.

Martin Conway


This blog is not intended to render legal services to the reader.  Consult with a lawyer concerning the specific application of the law to your unique circumstance.