What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

Bankruptcy Fraud: What It Is and How to Avoid It

When it comes to filing bankruptcy, a lot of emotions can rise to the surface. Relief is usually the most prevalent of these emotions; the erasure of anxiety-laden debt often provides a sense of liberation. Clients can also experience anger toward their harassing creditors or fear that their bankruptcy process will be hindered by several possible hurdles and landmines. Another common emotion for clients is embarrassment. It’s not easy for clients to come face to face with their debt.

Sometimes, these emotions can lead to rash and risky behaviors. A client might wish to conceal certain facts from an attorney or the bankruptcy trustee. They might consider hiding property, like jewelry or a second vehicle, or give property to someone else before filing. They might conceal being a Plaintiff in a lawsuit, credit card purchases or omit a small or infrequent source of income.

None of these moves are wise. Bankruptcy trustees are vigilant and unforgiving when it comes to fraud. Anyone caught filing a fraudulent petition can have that petition revoked. The filer may even face charges of perjury and can endure jail time as a result.

For these reasons, we advise that any clients considering bankruptcy be as honest and up front as possible about their property and finances. While bankruptcy fraud is not a common occurrence, being straightforward and candid about one’s financial situation means a smooth and stress-free bankruptcy process. The attorney has likely seen similar circumstances before and will best know how to handle any issues, no matter how uncommon they may seem at first.

It’s also important to understand that fraud is not the same as an error in one’s petition. Mistakes can happen and, as long as a client is honest with their attorney and the bankruptcy trustee, most errors can be fixed. However, an error in one’s petition can allow for a creditor to claim a debtor’s bankruptcy petition is fraudulent, which would then lead to extra time and money being spent on an adversary proceeding. Fraud charges can also lead to other civil actions against the client outside of bankruptcy court, which could also become costly.

With that in mind, a client might wonder what actions or omissions fall under the umbrella of bankruptcy fraud. We’ve outlined several possibilities below. This is by no means a complete list of all types of bankruptcy fraud, and a client should consult with their attorney if they have concerns about their past or current financial activity.

Before the Bankruptcy:

There are certain actions that a person may have taken before they fell into debt that could fall under the umbrella of fraud. Deceptive business practices, such as over- or underreporting one’s wealth or income, can be considered fraudulent activity that would prohibit the discharge of debt. Related to this, obtaining credit under false pretenses (like falsifying income on a loan application) or purchasing items on credit with no intention to repay (sometimes labeled as “Bust-out Schemes”) could also hinder one’s ability to have their debt discharged. Even the act of writing a bad check can summon a creditor’s suspicion of fraud.

Lenders and credit card companies are often on the lookout for these practices and will object to their debt being wiped away if they suspect this has happened. For that reason, it is often recommended that clients stop using their credit cards ninety days prior to considering a bankruptcy.

The ninety days before a bankruptcy petition is filed is called the “fraud presumption window.” If a fraudulent activity happens during this time frame, then the trustee will assume that the debtor intended to defraud the court and their creditors with that action and will respond accordingly. If the same activity happened over ninety days before filing the petition, then the debtor’s intent is more difficult to prove. This does not mean that such a determination is impossible, however.

Bankruptcy Assets

Concealing assets from the bankruptcy trustee is one of the most common forms of bankruptcy fraud. Sometimes, an inheritance or future source of income is not reported. Other times, a car is sold to a neighbor or friend at a very low value with the intention of getting the item back after a bankruptcy is discharged. Some debtors might even make valuable gifts to a charity instead of listing the asset or its transfer on their bankruptcy petition. In some cases, a large asset is never mentioned, with the hope that the trustee will never know it exists.

Hiding property in this fashion is considered fraud. When one declares bankruptcy, they are expected to list all of their assets (and any assets they had recently transferred or sold) within their bankruptcy petition. Those assets are, upon filing the bankruptcy petition, converted into the bankruptcy estate.

Once the exemptions to keep a person’s home and basic necessities are set aside, a person’s creditors are entitled to the rest of that estate for repayment. The client is giving up their property in exchange for debt relief (or, in the case of Chapter 13 bankruptcies, is agreeing to pay the value of their non-exempt property to their creditors over three-to-five years). Creditors would not agree to a bankruptcy otherwise.

If the creditors or the bankruptcy trustee suspect that property has been kept out of the estate, they will likely hold up the bankruptcy’s discharge, or have the debtor’s case dismissed altogether. If a client’s case is dismissed, filing a second bankruptcy will be more difficult.

It is also possible to commit fraud by undervaluing an asset, like a home or a fluctuating retirement account, in order to keep it as part of a bankruptcy exemption. Since the value of these items can range widely (especially in an uncertain market), it might be tempting to assume the lowest recent value is correct. This assumption could lead to questions by the bankruptcy trustee, and possibly the dismissal of one’s case and charges of perjury. For this reason, we recommend discussing the values of these items with a bankruptcy attorney to make sure they’re represented accurately on one’s bankruptcy petition. The attorney can then tell the client if their assets make them a better candidate for a Chapter 13 instead of a Chapter 7 bankruptcy.

Creditor Preference

Creditor Preference, on its surface, can seem like a harmless practice when one first hears about it. A client with a sudden windfall of cash (like a tax return or a lucky lottery winning) knows that money won’t be exempt when they file bankruptcy. So, instead of that money going to the bankruptcy estate upon filing, the client decides to pay back one of their creditors. Often, they’ll pay down the debt on a car loan or catch up on mortgage payments, because they’ll still be in their house or car after filing bankruptcy and those debts are the most logical ones to pay off.

A bankruptcy trustee would see this very differently. All creditors must be treated equally when a debtor files for bankruptcy. Paying back only one creditor and leaving the rest to suffer the full discharge of the client’s debt, especially within the ninety day “fraud presumption” window, can be considered fraud. One of the left-out creditors could bring this treatment up with the trustee, causing a delay in a client’s discharge or a revocation of their petition.

False Filings and Incomplete Records

A false filing happens when an individual files a petition with false or incomplete information or files with real information in multiple courts. This can cover a wide range of activities, from a debtor excluding a credit card from their bankruptcy (often because they wished to keep the card) to filing a second bankruptcy in a new state with a stolen identity.

While excluding information is often similar to concealing an asset, it can cover all parts of a bankruptcy petition. Leaving off a source of income in order to qualify for a Chapter 7 bankruptcy is fraud, as is not reporting accurate expenditures or past bankruptcies. Destroying or withholding documents, such as a tax return or loan paperwork, may also be considered a fraudulent act. Even leaving a creditor off a petition can be seen as creditor preference, as discussed above. Submitting false or incomplete information on a petition can result in perjury charges on top of having one’s bankruptcy dismissed.

A false filing can result when an individual files for bankruptcy in multiple places, or jurisdictions, in order to get around the eight-year limit on filing Chapter 7 bankruptcies. They might do this with the same name and information as their previous filing, or use an alias in order to get new debts discharged. Some debtors have even turned to identity theft in order to complete a fraudulent filing in a new state.

These types of filings can clog a bankruptcy court’s docket, drawing out the time before the petition is found fraudulent and dismissed. However, in our interconnected world, these types of fraudulent filings are easier for a trustee to find and, thus, are less common than they were previously. They also draw the stiffest penalties. False information on a petition always falls within the fraud presumption window and the intent to commit fraud is often much clearer to the trustee.

Bribery

Though rare, especially where Chapter 7 bankruptcies are concerned, bribery has been known to happen from time to time. This can happen, not just by bribing the court-appointed trustee for preferential treatment, but also by bribing someone to help hide one’s assets from the court. And the exchange need not be strictly in cash. Giving a court official gifts, such as lunch after the creditor meeting, can be considered a bribe. Campaign contributions also fall into this fraud category. Accepting these gifts would create a conflict of interest for the trustee, and most trustees would avoid this situation for the sake of their own appointments. Also, attempting to bribe a trustee could mean that there’s a cash asset that’s being hidden from the bankruptcy estate, which creditors would be interested in discovering.

Consequences

If fraud is suspected, federal prosecutors can bring criminal charges against the debtor. If an individual is found guilty of knowingly and fraudulently representing the facts in their petition, they can face up to twenty years in prison, or a fine of up to $250,000.00, or possibly both. Even if the debtor’s fraud was not successful, even the attempt or intent to commit fraud can be punished.

And those would just be the criminal elements to the fraud matter. The automatic stay could be revoked and the bankruptcy case itself could be dismissed. The debts would then remain intact and the creditors could still go after the debtor, only now they’d know about the attempted bankruptcy. Credit cards can be cancelled without debt relief. Loans may need to be reaffirmed at a higher interest rate. Foreclosures and evictions could continue as before. And, on top of all this, any debts listed with the first fraudulent petition cannot be discharged in subsequent bankruptcy filings.

For these reasons, most attorneys take fraud very seriously, as having their clients suffer these penalties are in no one’s best interest. A good attorney will often ask many questions while they are assembling their client’s petition, just to make sure that information isn’t inadvertently left out. It’s also important for the client to review their petition before filing, just to make certain there’s no reason for the trustee to suspect fraudulent information.

Even so, sometimes mistakes happen and a client will forget to report a source of income or an asset they’d long since forgotten about. As soon as the client realizes this, they should inform their attorney as soon as possible. Their attorney can then file an amendment to the bankruptcy petition. This might cost an additional fee, but it is better than facing the consequences of bankruptcy fraud. As long as the client didn’t intend to hinder, delay, or defraud their creditors by filing the amendment, the case can often continue as planned. Of course, catching the mistake before a creditor or the trustee notices it always helps the client’s case.

For additional information on bankruptcy fraud or determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates. We look forward to answering your questions!

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

One of the biggest questions debtors ask when they first consider bankruptcy is, “What property will I be able to keep?” The fear of having to give up their car, their home, or even their retirement account might keep a person from seeking bankruptcy protection. However, in most cases, the property a person owns is protected from seizure. Many states have laws which detail what kind of property, and how much of it, can be declared “exempt” when someone files for bankruptcy.

Nevada has a generous list of exemptions, from covering a person’s house and vehicle to collectibles and firearms. However, each of these exemptions has their own limitation. For example, a debtor might have a piano worth $6,000.00, but NRS §21.090(a) limits the amount of “Private libraries, works of art, musical instruments and jewelry” to $5,000.00. Given that limitation, that debtor might be forced to give up their piano to the bankruptcy trustee, who would then sell the instrument in order to pay the creditors.

However, the debtor might not need to give up their piano. Nevada has what is known as a “wildcard” exemption (NRS §21.090(z)) that states: “Any personal property not otherwise exempt from execution … including, without limitation, the judgment debtor’s equity in any property, money, stocks, bonds or other funds on deposit with a financial institution, not to exceed $10,000 in total value, to be selected by the judgment debtor.” Since the piano is less than $10,000, the debtor can declare their piano as their wildcard exemption and keep it.

The wildcard exemption can also be stacked on top of other exemptions. For example, let’s say the debtor has both the $6,000.00 piano and a watch valued at $5,500.00. Since both fall into the same category of NRS §21.090(a), and exceed that exemption’s $5,000.00 limitation, the debtor wouldn’t be able to keep them with that exemption alone. However, the wildcard exemption can be stacked on top of the original exemption, bringing the exemption’s new total to $15,000.00 and allowing the debtor to keep both items.

The wildcard exemption can also be divided and stacked. Let’s say a debtor has both the same $6,000.00 piano and the furniture in their house is valued at $13,000.00. NRS §21.090(b) sets the limit of “Necessary household goods, furnishings, electronics, wearing apparel, other personal effects and yard equipment” to $12,000.00. Without the wildcard exemption, the debtor would have to give up both their furniture and their piano. But with it, the debtor can deduct $2,000.00 from their wildcard exemption and apply $1,000.00 to both their piano and furniture exemption, saving both items from seizure.

The wildcard exemption is the only exemption that can be used to cover other items. If we take that same $6,000.00 piano, and that same debtor has only $10,000.00 worth of furniture, they can’t use the extra $2,000.00 from the furniture exemption to cover their piano. They’d have to use the wildcard exemption.

Exemptions can also double if someone files a joint bankruptcy with their spouse. If a married couple had that same $6,000.00 piano, their exemption under NRS §21.090(a) would be $10,000.00 instead of $5,000.00, which would allow them to keep their piano without having to use any of their wildcard exemptions. Only certain exemptions double for a joint bankruptcy, though. The exemption amount for a house or homestead remains the same, as does the amount in a pension or stock bonus plan.

If you think bankruptcy might be right for you, contact the legal experts at Luh and Associates for a free consultation.

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

The Advantages: Short Term

Immediate Relief

When a client takes their first steps towards filing bankruptcy, there’s often a sense of relief. The debts that have been weighing them down and giving them many restless nights can be eased, if not completely eliminated. The feeling of getting a fresh start in their financial life is both uplifting and very powerful for clients, as if the hurdle they’ve dreaded for months (if not years) wasn’t as tall as they’d been led to believe. It’s a chance for them to get back on their feet and plan for their financial future.

The Automatic Stay

When a bankruptcy petition is filed, an “Automatic Stay” goes into effect. This stay puts a stop to creditors collecting on dischargeable debts for a limited time while the bankruptcy is pending. All creditors will be informed of the bankruptcy (and the following Meeting of Creditors) and, if they contest the discharge of their debt, can attend the Meeting of Creditors and be allowed to speak their case. Often, creditors decide not to attend these meetings and allow the debt to be discharged.

Sometimes, a creditor will call after the bankruptcy is filed. This is usually because the call center for the creditor has not yet received notice of the bankruptcy. If this happens, a client need only provide the caller with their bankruptcy case number and filing date. If a creditor continues to pursue a debt or otherwise harass a debtor while the automatic stay is in effect, that creditor may be subject to legal action for violating the automatic stay.

Judgments Will Be Frozen and Wage Garnishments Will Be Halted (In Most Cases)

In order to garnish a debtor’s wages, a creditor must first obtain a judgment against the debt, then obtain a court order to secure their garnishment. A function of the automatic stay is to halt these activities in their tracks. Even if a garnishment is already in place, an automatic stay will keep the creditor from collecting from the debtor’s paycheck, allowing them to keep more of their money while their bankruptcy is being handled through the court.

The automatic stay does not apply to all types of garnishments. Domestic support obligations, such as alimony or child support, certain types of tax debt, and other non-dischargeable debts can still be garnished, even with a bankruptcy case pending.

Evictions, Foreclosures, Tax Sales of Your Home, And Car Repossessions Will Be Halted

The automatic stay will also block all collection attempts from mortgage lenders, landlords, and title creditors and will bring these activities to a temporary halt. This often gives the client a chance to breathe while their case is being processed. In some instances, the erasure of debt from a Chapter 7 bankruptcy allows the client to correct their financial deficiencies with mortgage or car payments, allowing them to stay in their homes and keep their vehicles.

Utility Companies Will Keep Their Services Running

The automatic stay also applies to electricity, gas, water, and other utility companies with which a client may have debts. Filing for bankruptcy allows a client to keep the lights on and the water running while the stay is in effect.

Driver’s Licenses Can Be Recovered

If a driver’s license was suspended because a client had debts related to parking tickets or driving without insurance, a Chapter 7 bankruptcy might be the first step in having those debts removed and the driver’s license reinstated.

Most Debts Will Be Eliminated

The elimination of debt is the primary purpose for going through the bankruptcy process. A Chapter 7 bankruptcy can erase most (but not all) types of consumer debt, from credit cards and medical bills to past due utility bills and bank loans. Bankruptcy can even eliminate some types of personal tax debt. These debts can have a crushing effect on a client’s life, weighing them down with constant anxiety and dread. Once they receive their discharge, clients can finally get their feet back under them and build their financial lives anew.

 

The Disadvantages: Short Term

Credit Cards Will Be Cancelled

Even if a client wishes to keep a certain credit card and wants to continue making payments towards that debt, the credit card company will be notified of the bankruptcy and will likely cancel the card. Any recurring payments should be moved and purchases should be halted so the credit card company doesn’t claim that the bankruptcy is fraudulent.

Banks Can “Setoff” Funds from Checking and Savings Accounts to Pay Loans

If a client has a loan or a credit card with their banking institution, then the bank can take money directly from a client’s accounts and use it to pay the debt.  Because of the automatic stay, the bank would need to petition the Bankruptcy Court to obtain relief from the automatic stay to do this.  To avoid this, many clients have changed banking accounts or had to withdraw their money before filing bankruptcy.

Property Could Be Forfeited

In most cases, Nevada residents filing for bankruptcy have the benefit of exempting their property. Married couples filing jointly have even more exemptions than single filers. However, if a piece of property does not fall under one of these exemptions, then it becomes part of the bankruptcy estate when the petition is filed. After that, the trustee decides whether the property can be sold to satisfy a portion of the Debtor’s debt.

Tax Refunds May Be Denied

If a client is expecting a large tax refund, the Bankruptcy Trustee may include that as part of the bankruptcy estate and distribute the refund to the client’s creditors instead.

Co-Signers Can Be Liable for Any Debts Erased

If a co-signer is kept unaware of their friend or family member’s bankruptcy, the news of being suddenly liable for a debt can come as a shock. This can strain relationships in even the best of times, and may affect the co-signer’s credit report and keep them from buying a house or car. It is important that any co-signers be kept apprised of the client’s bankruptcy process and that arrangements are made to lessen the impact they may experience.

Debts Repaid to Family Members Can Be Seized by The Bankruptcy Trustee

If a client paid back a debt or transferred property to an “insider” (a family member, a business partner, the client’s corporation, or their friends or affiliates) within the last year of filing for bankruptcy, that insider can be sued to recover that money or property. The recovered money (or funds from the sale of property) would then be redistributed to the client’s creditors. While every case is different, in instances where a debt like this has been repaid, it might be in the client’s favor to wait to file bankruptcy.

The Disadvantages: Long Term

Credit Reports and Credit Score Will Be Affected

When a bankruptcy is first filed, a client’s credit score is likely to be lowered as a result. This score will stay low for some time. If a client’s debt history had resulted in an already-low credit score, the change will not be as much. A higher credit score will fall further after a bankruptcy. The good news is that, once the score has fallen, it will rebuild over time. Many credit scores recover significantly within the first year after filing bankruptcy.

The credit report will keep record of the bankruptcy for much longer. A Chapter 7 bankruptcy will stay on a client’s credit report for up to ten years. A Chapter 13 bankruptcy, by comparison, is only on a debtor’s credit report for seven years. During that time, anyone who accesses a debtor’s credit report will see the bankruptcy and the debts that were discharged. This can result in higher insurance premiums, higher APR rates, unfavorable options for mortgages or rentals, and can impact employment searches.

Some Debts Will Still Need to Be Repaid

It’s important to note that a Chapter 7 bankruptcy won’t erase all types of debt. Student loan debt (unless the client can prove the debt is an undue hardship), domestic support obligations, certain types of tax debt, and certain other judgments or debts won’t be discharged after a bankruptcy case. Proving that a student loan causes an undue hardship is often difficult and requires a separate lawsuit to be filed, one which the client may not have awarded in their favor. However, the erasure of a client’s dischargeable debts often allows that client the funds to being paying the non-dischargeable obligations.

Clients Are Unable to File Bankruptcy Again If More Severe Circumstances Arise

If a client files a Chapter 7 bankruptcy, they are not allowed to file a Chapter 7 bankruptcy again for eight years. If the client wished to file a Chapter 13 bankruptcy after their Chapter 7, they’d have to wait four years after the Chapter 7 petition was filed. This means that, if a client finds themselves in debt again, they won’t have the relief of bankruptcy until those time limits expire.

If a client knows more debts are on the horizon, like medical bills for an ongoing treatment, it may be more beneficial for them to wait to file bankruptcy

 

The Advantages: Long Term

Creditors Will Lend Credit to Former Debtors

Creditors know that, after a debtor has filed bankruptcy, they are unable to file bankruptcy again for several years. This makes the former debtor less of a credit risk. While creditors will initially withdraw from anyone who has recently filed bankruptcy, they will soon start offering car loans and credit cards again, often at a higher APR rate than previously available. There are also lenders who specialize in giving credit to former debtors, knowing they’ll earn much more in interest than they would from a non-debtor (and knowing the debtor has fewer debts weighing them down). As time passes after the initial filing date, more and more creditors will feel comfortable lending to a former debtor, especially as their credit score continues to climb, and the credit rates will return to normal.

A Higher Credit Score

While there in often an initial dip in a client’s credit score after filing, in the long term, a bankruptcy can improve a client’s credit score. Filing a Chapter 7 bankruptcy erases much of the debt that had lowered a client’s score in the first place, giving them a fresh place to start rebuilding. Within a year, if the client keeps up with any reaffirmed or non-discharged debts, their credit score should start to climb back to good credit levels. A client can also seek to improve their score with low-money loans and secured credit cards that are maintained and paid on time.

A Chance at Long Term Financial Security

Bankruptcy, while a major step in any person’s life, can also be seen as one of many tools in a client’s “financial health” toolbox. If used properly, and alongside many other tools acquired in a client’s financial education classes, bankruptcy can help a client build a new life.

For additional information on determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates. We look forward to answering your questions!

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

The COVID-19 pandemic has changed (hopefully temporarily) many things we once considered normal here at Luh & Associates. However, we remain committed to providing the most cost effective bankruptcy experience. While we loved having our clients come in to our office and get to know us, it is best for all parties to abide by social distancing practices for the time being. While this may mean doing interviews via videoconferencing and sending documents through fax and email, it doesn’t mean your bankruptcy has to slow down.

To this effect, bankruptcy trustees across the country are working to implement secure videoconferencing systems so that anyone filing for bankruptcy can have their case administered in a quick and efficient manner. As they’ve been working with these systems, many trustees have found minor issues that have delayed their progress in running these hearings. In order to smooth out the process, here are a few tips for our clients to know before their own Trustee Hearing. Please take a moment and review them so that your hearing can go as smoothly as possible.

Make sure your attorney has all the requested documents – The trustee often asks for tax returns, bank statements, paystubs, and other materials be delivered to their office over two weeks before the hearing date. The sooner your attorney has these documents, the sooner they can be delivered to the trustee’s office and prepared for your hearing.

If an interpreter might be needed, make sure the attorney knows this in advance – Attorneys will need to alert the trustee to have an interpreter available in the videoconference.

Review your list of trustee questions – Your attorney will have a list of common questions that a trustee will ask during the hearing. Reviewing and answering these questions can help calm the nervousness many people feel before meeting the bankruptcy trustee, whether that meeting is in person or over a videoconference.

Do a test run the night before (if not sooner) – Download the requested application (not all bankruptcy trustees use Zoom) and double-check your audio and video settings. If possible, set up a videoconference with your attorney prior to the hearing to check for any problems. The sooner your attorney knows of any issues, the better they’ll be able to fix or find a workaround so you can have a smooth hearing with the trustee.

Dress as if you were going to court – While a suit or dress is not necessary, it is important to attire yourself in a presentable manner for the trustee. A button-down or collared shirt or blouse will serve well for the occasion. One should also wear a good pair of pants, like slacks or dress pants. A professional skirt or dress is also an option. Clothes should be clean, without holes, and tactful for the hearing.

Arrive at the videoconference fifteen minutes early – Sometimes technology works against us and it takes a little longer than usual to log in to a video conference. Arriving early means those problems are taken care of and no one risks missing their trustee hearing. If everyone is early, the trustee can organize their virtual rooms and start their sessions promptly, rather than waiting to clear up technical issues.

Make sure your name on the videoconference matches the name on your petition – While names like Superman and Wonder Woman are fun to use in family and friend settings, they aren’t helpful for the trustee when they need to bring you in to your 341 hearing. Nicknames can have this same problem, especially if it’s not a common nickname for the name on the petition. Take a moment to double-check that your name is accurate so the trustee knows you’re present for the hearing and doesn’t skip over you.

Be patient – A trustee will hold several hearings at your designated time. It may take a while, but they will get to your case. Be ready to go when they call for you.

Have your Driver’s License and Social Security card ready to present to the Trustee – A bankruptcy trustee often conducts multiple hearings a day, and will have you and your attorney in a virtual waiting room before you enter. When it’s your turn, the trustee will pull you into the virtual hearing room first and, off the record, verify your identity. If you have your Driver’s License and your Social Security card ready, this step only needs to take a few seconds. The trustee can then bring in your attorney and any creditors that show up and the hearing can proceed.

Have a copy of your petition on hand – Having this beside you at your videoconference, as well as any other materials the attorney suggests, will help you and the trustee stay on the same page as questions are asked.

Choose a good room for holding your videoconference – A good environment will keep the focus on you during your hearing, and not on your surroundings. Make sure your room isn’t prone to echoing, has good internet reception (or that your device is plugged in via ethernet), has good lighting aimed towards your face so the trustee can see you and your identifying cards, and is overall quiet and clean. Avoid overly intrusive locations like a bedroom or a bathroom. If your location does not have a decent internet connection, let your attorney know beforehand so that they can arrange a new location for you.

Keep the camera or device stationary – A moving background can, at best, be a distraction to your trustee hearing. Other times, a moving background can disorient viewers and make them feel nauseous during the proceedings. If needed, prop your camera or device on top of a table, a counter, or a bookshelf instead of holding it in your hand.

Eliminate possible distractions – Sometimes, distractions happen. The bankruptcy trustees know that everyday life often interrupts at the worst possible time. While it’s not possible to remove every possible distraction, a few easy steps can help your hearing run smoothly. Let your family know what day you’re meeting with the bankruptcy trustee and take care of meals and activities beforehand. Close the door to the room you’re using for a meeting space and place a sign outside. If possible, keep pets in a separate room. Turning off your notifications and closing out of other apps will also help keep you focused and engaged.

Mute your microphone – Microphones are more sensitive to background noise than most people realize. Fans, air conditioners, outside traffic, and even static can contribute to a deluge of background sounds, which can amplify and drown out what you or the trustee have to say. This problem increases when there are multiple active microphones at your hearing. If possible, mute your microphone while you are not speaking so your background noise doesn’t contribute. When it’s your turn to speak, remember to turn your microphone back on. If you are at an audio-only conference, learn how to mute the microphone when calling on your smartphone or other device.

Don’t be afraid to ask questions – Sometimes the internet skips while the trustee is talking. Sometimes the trustee will say a phrase or ask a question that may not make sense. Sometimes, there will be a noise outside that distracts you from the hearing. Don’t be afraid to say, “Please repeat the question” or to ask for clarity if you don’t understand something. If needed, your attorney is also there to assist you through the hearing.

Try not to interrupt or talk over anyone – Multiple people talking at once is a common problem in videoconferences. A trustee can only actively hear one party at a time. Don’t worry if you wish to explain something before a creditor or the trustee finishes. The trustee will give you your chance to speak. If you fear you’ll forget to say something, write it down and address that issue when it’s your turn.

Try to look at the camera more often than at your own image – Everyone feels that urge to use their phone or tablet as a mirror when they’re in a video chat of any kind. People sit straighter, fix their hair, and tug their clothes until the image is near perfect. This isn’t a bad thing, but people can feel disconnected if a speaker continues to watch themselves while they talk. Good eye contact, while not required in a videoconference, is helpful for appearing focused and attentive when answering the trustee’s questions. If it helps, place a little removable sticker beside your camera as a reminder and situate your device so it rests at eye level.

Eat before or after the videoconference, not during – Chewing sounds on a microphone are not ideal for a trustee hearing or any videoconferencing setting. Eating on camera is also a distraction. Avoid eating during your hearing. If necessary, have an easy-to-sip cup nearby for water.

Remember that you are on live video and stay focused – We’ve all heard horror stories of someone using the bathroom or picking their nose while in a videoconference. I’ve been in a videoconference where someone, thinking they were muted, started playing their guitar over a presentation. It can be easy to lose focus, especially if you have a long delay in the virtual waiting room. Try to keep your attention on the hearing by keeping your distractions, like a phone or a computer, in another room. Avoid running other programs in the background. If necessary, write yourself a note to keep your attention from drifting away and forgetting you’re still on camera. If something embarrassing does happen, apologize quickly and move on.

While this may seem like an extensive list, trustees are finding success with videoconference hearings. They understand that taking a day to go to court, find parking, and wait in a large room for a hearing was not ideal even before our current pandemic. Videoconferences have increased creditor participation, taking away the need to have hearings rescheduled and discharges delayed. This new method for Trustee hearings may become a fixture for our future, and the need for videoconferencing skills is likely here to stay.

For additional information on determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates. We look forward to answering your questions!

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

Unfortunately, the coronavirus pandemic has sent several industries into a tailspin, especially in Nevada.  According to RENO ABC NEWS, as of May 19, 2020, 434,388 unemployment insurance claims have been filed since the week ending March 21, 2020.

Many individuals are either facing unemployment or a significant change in work life that they did not anticipate. Debts that were once manageable have ballooned into uncontrollable burdens. Even with stays on evictions and calls to creditors for relief, it’s possible to find oneself falling deeper and deeper into debt.

In these situations, many find themselves looking to bankruptcy for relief.  Luh & Associates hopes to answer the common questions everyone has, including how Bankruptcy may have changed in this new pandemic environment.

Am I able to file bankruptcy during the quarantine?

Clients are able to proceed with their bankruptcy during this time. The biggest change we’ve seen is in the 341 Meeting with Creditors, which happens approximately thirty days after a client files their petition with the court. Instead of meeting in person, all hearings with the Bankruptcy Trustee (including creditor meeting) are being conducted via videoconference. If a client requires assistance with attending a videoconference meeting, our office is more than happy to facilitate that need. Any trials or evidentiary hearings that must be held in person are currently being continued until after June 30th, 2020. This date is subject to change.

Our office is also committed to client safety and has transitioned to contactless interactions for most of our bankruptcy process. Our initial consultations and bankruptcy intake interviews can now be handled over the phone or via videoconference, and clients can fax or email our office the documents necessary to create petition. We can also utilize a file-sharing service, like Dropbox, for larger documents which may have been delivered through traditional mail. For documents that need to be hand-delivered to our office, we are supplied with masks and hand sanitizer to limit risk and to make our clients feel secure in our environment.

The United States Bankruptcy Court for the District of Nevada has also temporarily suspended the need for an original signature on bankruptcy petitions, meaning fewer necessary visits to our office (Administrative Order 2020-07). This order is subject to change.

How do unemployment benefits affect my ability to file bankruptcy?

Unemployment insurance benefits, with the exception of federal money from the CARES Act and the Federal Pandemic Unemployment Compensation, are treated like income for a Chapter 7 bankruptcy.

A client’s income is based on the six months before the filing date of their petition. This is referred to as the Means Test. We take the total income earned over those six months and divide it by six in order to get the client’s monthly income. This number must be less than the median income figures for a person’s household in order for them to qualify for a Chapter 7 bankruptcy.

In some cases, this may mean a client will have to wait until their monthly median income is low enough to qualify before filing their bankruptcy petition. Please click here to see the median income figures dated May 1, 2020. These figures are subject to change.

Will money from the Federal Pandemic Unemployment Compensation or the nationwide stimulus affect my ability to file bankruptcy?

The CARES (Coronavirus Aid, Relief, and Economic Security) Act has generated many changes in the Bankruptcy code with regards to Chapter 7 and Chapter 13 cases (§1113). Most important is that the income generated from coronavirus-related payments from the federal government is not included when calculating a debtor’s income. This means that, even if a client received both the CARES Act’s federal stimulus and money from the Federal Pandemic Unemployment Compensation, neither of these will push a debtor’s income over the income limit for filing a Chapter 7 bankruptcy.

With regards to a Chapter 13 bankruptcies, federal payments are also not included when calculating a debtor’s disposable income into their repayment plan. The CARES Act also allows a debtor to modify their repayment plan if the debtor has experienced financial hardship due to the pandemic. A debtor may also extend their plan payments for up to seven years after the initial plan payment was due. These new rules only apply to cases that had repayment plans in effect before the enactment of the CARES Act.

These changes are temporary and only applicable for one year after the effective date of the CARES Act. These changes are also applicable to all pending Chapter 7 and Chapter 13 bankruptcy cases.

Can a creditor take my stimulus money or unemployment benefits?

While unemployment benefits are used to determine income, they are exempted from being used to repay debts in Nevada, except in cases where the debt occurred during the period of unemployment. This does not apply to funds from the FPUC or the CARES Act, which includes the nationwide stimulus package.

Once stimulus funds are in a bank account, they can be subject to seizure. Some banks take money from a client’s checking or savings account and apply it towards a debt, such as a loan or a credit card, at that same institution. This is known as a setoff, and a bank can perform this before or after a client files a bankruptcy case.

Sometimes, it is in a client’s best interest to remove funds from their bank account before a setoff can take place. For more information as to whether this step is right for you, please contact our attorneys for a consultation.

Will the bankruptcy trustee ask me to give up money from the CARES Act to my creditors?

When the CARES Act was passed, the federal law had no protections in place to prevent its seizure from creditors. There is currently no Nevada law protecting these specific funds.

There are, however, many bankruptcy exemptions that a Nevada resident (who has lived in the state for more than two years) may utilize during their bankruptcy. One that might help in this case is Nevada’s “wildcard” exemption, that states the following property is exempt from execution: “Any personal property not otherwise exempt from execution pursuant to this subsection belonging to the judgment debtor, including, without limitation, the judgment debtor’s equity in any property, money, stocks, bonds or other funds on deposit with a financial institution, not to exceed $10,000 in total value, to be selected by the judgment debtor.” (NRS §21.090(z))

For additional information on determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates.  We look forward to answering your questions!

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

Here, at Luh & Associates, our experienced bankruptcy attorneys have answered many of these “Top 10” questions for Las Vegans like yourself about filing bankruptcy in Nevada.  While every bankruptcy is different, there are many common concerns that clients can have as they consider filing bankruptcy. If you don’t see your particular question listed here or don’t fully understand an answer, don’t worry, as always, we are available to answer any additional questions, either by phone, email, video conference, or here through our website’s chat function.

  1. How long does bankruptcy take?

Generally, a Chapter 7 bankruptcy will be discharged (and the dischargeable debts will be erased) four months (120 days) after the bankruptcy petition has been filed.

The date the client files their petition can vary depending on a client’s needs. Some clients need a petition filed quickly in order to avoid the actions from a judgment or garnishment going into effect (or continuing to take effect, in a garnishment’s case). In these situations, it may be best that a client bring as much information as possible, including bills, bank statements, and paystubs, to their initial consultation so their petition can be drafted quickly and correctly.

Some clients may need to wait to file a Chapter 7 bankruptcy. Because a client’s last six months of income are considered, those who are recently unemployed may still have too much income to qualify for a Chapter 7 bankruptcy. We can prepare a client’s petition in the meanwhile, so they can file as soon as they are ready to do so.

An attorney can best guide a client to knowing which timeline is right for them.

  1. What happens after a bankruptcy petition is filed?

There are two major events that happen after a Chapter 7 bankruptcy petition is filed and the automatic stay goes into effect: The 341 Meeting of Creditors and the Discharge.

The 341 Meeting of Creditors happens around thirty days (give or take ten days) after a client files their bankruptcy petition. This is the meeting where the client (and their attorney) meet with the bankruptcy trustee and any creditors who attend the meeting. The trustee proceeds to ask questions of the client to understand their situation and why they are filing for bankruptcy. Creditors who attend are also able to ask questions of the client, but most of the time, the questions are asked by the trustee alone. After this meeting, the trustee and creditors have thirty days to file objections against any property claimed as exempt and sixty days to file an objection to the discharge.

*             Note: In light of the current COVID-19 pandemic, a client’s 341 Meeting of Creditors will now be conducted via videoconference. If a client needs assistance attending this videoconference, our attorneys are happy to help make arrangements.

If no objections are filed, the client will then receive the discharge order. This often happens around ninety days after the 341 meeting of creditors. Once the discharge order is entered, the dischargeable debts are cleared and the client no longer needs to pay those creditors.

  1. Can I change my mind after filing Chapter 7 bankruptcy?

In most cases, no. A Chapter 7 bankruptcy can’t be dismissed unless the debtor can show good cause to do so. Showing good cause is very difficult and the bankruptcy trustee and creditors will likely disagree on whether the client’s reason to dismiss a case is “good cause.”

A situation that is more likely to happen is converting a Chapter 7 bankruptcy into a Chapter 13 case. This would allow for a debtor to keep any property they discovered to be non-exempt (and thus subject to seizure) in their Chapter 7 case and instead create a repayment plan to satisfy their creditors. This is, however, subject to the bankruptcy trustee’s discretion and a move that should be discussed with your attorney before undertaking.

Filing Chapter 7 bankruptcy is a serious decision and should not be undertaken lightly.  Let our experience attorneys guide you in the decision.

  1. Can my Chapter 7 bankruptcy be revoked after it has been discharged?

While this is rare, it is a possibility. A trustee will liekly try to revoke a discharged case if fraud is discovered after the discharge was granted or if the debtor failed to disclose any assets they knew they would acquire after their discharge. A discharge can also be revoked if the debtor refuses to obey court orders or fails to respond adequately to a bankruptcy audit.

To get a discharge revoked, a creditor (or the bankruptcy trustee) would file a complaint. That debtor would then have the opportunity to respond and both parties would need to go to court to have the matter resolved.

The key to avoiding this situation, and to a good bankruptcy overall, is full disclosure. Alert your attorney to any problems you foresee arising from your financial situation and they will assist you in how to navigate with them throughout your bankruptcy process.

  1. Does a Chapter 7 bankruptcy stop a wage garnishment?

In most cases, yes. When a bankruptcy petition is filed, an “Automatic Stay” goes into effect. This stay puts a stop to creditors collecting on debts for a limited time while the bankruptcy is pending. If the debt is later discharged, the creditor cannot collect against it.

If a debtor decides to go forward with a bankruptcy, they would want to inform the creditor and their employer as soon as the bankruptcy petition is filed with the court. The sooner their employer is aware of the bankruptcy matter, the sooner the garnishment can stop.

A bankruptcy won’t stop all garnishments, however. Domestic support obligations, such as alimony or child support, certain types of tax debt, and other non- dischargeable debts can still be garnished after a client has filed their Chapter 7 petition.

If for some reason, the creditor tries to continue a wage garnishment, that creditor may face liability for damages to debtors for automatic stay violations.  Damages include actual damages, punitive damages, attorney’s fees and costs. These violations can also include a creditor that continues to make harassing telephone calls after your bankruptcy petition is filed.

  1. Does a Chapter 7 bankruptcy stop a judgment?

In most cases, yes. If the judgment is for a debt that is dischargeable in a bankruptcy, then filing for bankruptcy will stop the creditor from using the judgment to collect against the debtor.

A judgment, however, can allow a creditor to place a lien on a debtor’s home or other property, and these liens are not erased with a bankruptcy alone. The sooner a debtor files their bankruptcy after receiving a judgment, the more likely they are to avoid having a lien placed on their home. In some cases (but not all), it is possible to remove a lien if the property’s equity falls under one of Nevada’s bankruptcy exemptions. If a debtor finds themselves with a lien on their property due to a judgment against them, they should discuss the possibility of lien avoidance action with a bankruptcy attorney.

  1. Does a Chapter 7 bankruptcy eliminate all debts?

A Chapter 7 bankruptcy can take care of many different debts that impact a client’s life. Debt from medical expenses, credit card charges, past due utility bills, and several other sources can overwhelm a person and make them seek relief. While bankruptcy can be helpful in many cases, there are certain debts that cannot be discharged through the Chapter 7 process.

Most important, a debt cannot be discharged if it is never listed on your bankruptcy petition in the first place. While it is possible to amend a petition, we urge our clients to avoid this step by making sure their draft is as complete and accurate as possible, including the listing of every creditor they have.

Also, any debt incurred after a client has filed their bankruptcy petition will not be discharged. A client may be facing this issue if they are burdened with medical debt and are still being treated by medical professionals. If they file their petition before their treatment is complete, the bills incurred after the petition’s filing date (or any bills not listed in the petition) will not be discharged, even if it’s for the same medical issue. This also applies to recurring utility bills. A mounting past due utility bill may be forgiven, but the recurring charges after the filing date are still due.

With regards to student loans, the debt must be proved as an undue hardship to the bankruptcy trustee. This makes the discharge of student loan debt, while technically possible, extremely rare to obtain.

Other debts that a Chapter 7 bankruptcy won’t discharge are domestic support obligations (like child support or alimony), fines or restitution from a criminal proceeding, court fees from a criminal proceeding, debts as a result of driving under the influence, most state and federal taxes (with the exception of some income taxes) and certain condominium and cooperative fees.

Debts incurred through fraud, such as using a credit card within 90 days of filing for bankruptcy, can be discharged unless the creditor objects. Credit card companies are on the lookout for these types of charges, however, and will likely object at the Meeting of Creditors if they suspect this fraud. Other types of debts that can be discharged unless they’re objected to are debts from willful and malicious injury to another person or their property, or debts from embezzlement, larceny, or breach of trust.

Lastly, if a debt was listed as part of a previous bankruptcy, and that bankruptcy was dismissed due to fraud or misfeasance, that debt cannot be discharged in a new bankruptcy.

  1. Can I keep my house if I file for bankruptcy?

A house is very likely to be the most valuable asset a person owns. Not only is it valuable monetarily, it is often the place where people find their greatest sense of security and well-being. When it comes to a person’s house and filing for bankruptcy, there’s a few questions that need to be asked:

  • Is the client current on their house payments?
  • Will they be able to make their mortgage payments after the bankruptcy?
  • Is there an exemption to protect the person’s home?

Nevada’s exemptions (i.e., property that you are allowed to keep), listed under NRS § 21.090, states that a dwelling of the debtor occupied as a home for the debtor and their family, where the amount of equity does not exceed $605,000 and is situated on land not owned by the debtor, is exempt from execution in a bankruptcy matter.

If the amount of equity in the client’s primary house falls below that amount, and they are and can stay current on mortgage payments, then they should be able to keep their home. This only applies to a client’s primary home, not to any vacation homes or rental properties.

A Chapter 7 bankruptcy, however, only discharges a client’s personal liability for a debt. This means that if you have a mortgage or loan, that obligation will not be discharged.  You will still have to pay your mortgage payments to keep your house.

If the client is behind in their payments, a Chapter 7 bankruptcy cannot help them to catch up on past due mortgage payments. They might wish to consider a Chapter 13 bankruptcy instead, where a debt repayment plan is established. If a person has questions as to whether a Chapter 7 or a Chapter 13 bankruptcy is best for them, they can schedule a consultation with one of our attorneys. We’d be happy to help guide you through this process!

  1. Can I keep my car if I file for bankruptcy?

For most people in Nevada, a working automobile is a necessity. While the public transportation system is improving here in Las Vegas, the ever-growing suburban sprawl means that, without a car, a person is severely limited with regards to the places they can visit or the employment they can seek. Some may even be using their vehicles as a means of employment, from rideshare operators to delivery drivers.

Like a person’s house, there are a few questions to ask when a person is considering bankruptcy:

  • Is the vehicle paid off?
  • If not, is the client current on their payments?
  • Will they be able to make their car payments after the bankruptcy?
  • Is there an exemption to protect the person’s vehicle?

Nevada’s exemptions, listed under NRS § 21.090, states that a debtor may keep one vehicle, so long as the vehicle’s equity does not exceed $15,000 or the creditor is paid an amount equal to any excess above that equity. In a joint bankruptcy petition, the amount doubles from $15,000 to $30,000. The equity amount does not apply to vehicles that are equipped or modified to provide mobility for a person with a permanent disability.

Many times, when a client still has a car loan and goes through with a bankruptcy, the creditor will ask the client to sign a reaffirmation agreement. This agreement is used to “reaffirm” a debt after a bankruptcy has been filed, allowing a client to keep property that would otherwise be repossessed.

Like with a person’s house, this only applies to the primary vehicle. Additional vehicles may not be subjected to an exemption and should be discussed with the client’s attorney before they file their bankruptcy petition.

  1. How will bankruptcy affect my credit? Will I still be able to buy a home or a car after filing for bankruptcy?

A bankruptcy will, in the short term, lower your credit score. The amount of the decrease will vary from person to person, but it will be a noticeable change. It may, however, improve your credit score in the long term. With their debts eliminated, clients are able to reestablish themselves, make their payments on time, and work themselves up to a better credit score than they would have had if they still had their dischargeable debts weighing them down.

After a bankruptcy discharge, there are many ways to start rebuilding your credit. Obtaining a secured credit card or a small installment loan and paying those new debts on time can help if the institutions providing the card or loan report to the three major credit bureaus. Keeping credit card balances low will also help a credit score rebound quicker.

Credit card companies may also advertise themselves to a client after that client files for bankruptcy. They know the person can’t receive a Chapter 7 bankruptcy discharge for another eight years. Car loans services will also offer loans to a new bankruptcy filer. In most of these cases, the credit cards and loans offered will have very high interest rates, hidden charges, and annual fees, making them an unfavorable option at best.

The wait to obtain a new home mortgage may be much longer. It will vary from one lender to the next, with some conventional lenders waiting four years after a Chapter 7 bankruptcy before offering a home loan. A client’s income, new debt load, and the amount of their down payment could all affect a client’s loan qualification.

A Chapter 7 bankruptcy will stay on a client’s credit report for ten years after it’s been filed. While this seems like a long time, the fresh start allows a client time to rebuild their credit score, bringing it up to “good credit” levels long before the bankruptcy is dropped from their reports.

For additional information on determining whether you qualify for a Chapter 7 bankruptcy, please contact the bankruptcy attorneys at Luh & Associates. We look forward to answering your questions!

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

If you live in Las Vegas, Nevada and are looking to file bankruptcy,  you should be aware of the median income. The median income is used for the “Means Test” in determining whether you qualify to file under Chapter 7 or Chapter 13.  To qualify for Chapter 7 in Las Vegas, Nevada, the your income must typically be below the median income.

As of May 1, 2020, the revised median income figures for Nevada released by the United States Trustee will apply to bankruptcy cases filed after that date under Chapter 7 and Chapter 13.   The new figures reflect a slight increase in median income in Nevada for certain family sizes.

   Median Income
Household Size Annual Monthly
1 Earner $52,449 $4,371
2 People $65,756 $5,480
3 People $74,856 $6,238
4 People $81,528 $6,794
5 People $90,528 $7,544
6 People $99,528 $8,294
7 People $108,528 $9,044
8 People $117,528 $9,974

Add $9,000 (or $750/month) for each additional person.  For additional information on how to calculate your household size or for information regarding how the median income is used in determining whether you qualify for Chapter 7 and/or Chapter 13, please contact the Las Vegas Nevada bankruptcy attorneys at Luh & Associates.

Please keep in mind that the Bankruptcy Court has no jurisdiction (i.e., power) over credit reporting agencies.  However, pursuant to the Fair Credit Reporting Act (FCRA), 6 U.S.C Section 605, credit reporting agencies may not report a bankruptcy case on a person’s credit report after ten years from the date the case is filed. Other negative credit information is removed after seven years.

The Federal Trade Commission, Bureau of Consumer Protection can provide further information on reestablishing credit and addressing credit issues.

If you would like to to view your credit report for free, AnnualCreditReport.Com is the only source free credit reports authorized by federal law.

 

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!

Luh & Associates would like to thank our clients and peers whose trust enabled Jason Ferris and Craig Slater (cover page) to be recognized this year in Nevada Business Magazine’s Legal Elite, 2017.

You can read about their selection here.

“Surround yourself with the best people you can find . . .” – Ronald Reagan

What is Bankruptcy Fraud and How to Avoid Bankruptcy Fraud!You have your bankruptcy lawyer in Las Vegas and you coordinated with your bankruptcy trustee. You’re ready to have your meeting of creditors. You’re on your way to a debt-free life. However, there is one person who stands in the way. During your bankruptcy petition, you may face the ultimate decision maker in your case: your bankruptcy judge.

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