First, what is a chapter 20? One files first a chapter 7 to discharge all unsecured debt. After receiving a discharge which takes around 4 months, one can file a chapter 13 if it benefits the debtor. One benefit has been pointed out by the U.S. Bankruptcy Appellate Panel (PAP) of the Eight Circuit, on August 29, 2011. The panel pointed out that a debtor can file a chapter 13 after a chapter 7 to strip a wholly unsecured junior lien (meaning a second or third mortgage, the first mortgage would be older and higher in rank and would be senior) from his residence. The word "residence" is important, it cannot be a rental property, in order to strip off (meaning wiping out or eliminating) the second lien, the debtor must live in the property. The fact that the debtor does not receive a discharge in the chapter 13 (because one would have wait 4 years from after filing the chapter 7 in order to receive another discharge in a chapter 13) does not bar the effective lien avoidance. What happens if the case gets dismissed? Then, the lien would not be avoided even though the adversary proceeding was approved by the court, the plan must complete in order to avoid the lien. What does it mean if the lien is avoided? Who pays for the mortgage (lien) that is stripped off? Nobody, the mortgage company has the loss. The holder of the avoided lien is an unsecured creditor.

Everyone has heard the term “bankruptcy,” and many believe that it is a simple matter of going before a judge and ridding themselves of all of their debt.  This is not the case, and both traditional and newer laws may impact one’s decision to file.Definition of BankruptcyAt its core, bankruptcy is a legal filing, in which an individual declares that s/he does not have the money to pay existing debt.  The filing is put before a federal judge, who then determines how the debt will be discharged (“wiped out”).  For individuals, there are two types of bankruptcy – Chapter 7 and Chapter 13.  Which chapter to select depends on some very specific factors.Bankruptcy law has it beginnings at the federal level, and the types of filings and criteria are generally established by Congress.  Each state has added to those federal laws, however, and now, all states have their own “rules of play” as well.Chapter 7 BankruptcyThe majority of people who cannot pay their debts file for Chapter 7, often known as the “wipe the slate clean” bankruptcy.  Generally, there cannot be steady wages that provide any disposable income to the person, and the goal is to be rid of all “unsecured’ debt, such as credit card accounts, personal loans and medical bills.  The debtor must prove, however, that s/he does not have the assets or the regular income to pay off even a portion of the amount owed.  Social Security, insurance proceeds, and certain other types of income cannot be considered income.The Chapter 7 filer must list all assets, including jewelry, artwork, stocks/bonds, and even pedigreed pets. (Note:  Generally, clothing, furniture, basic personal items and an older or un-paid for car will not be considered assets).  State law determines how much equity you may have in a newer car and home, in order to keep them. It is important not to “fudge” or hide assets, because “bankruptcy fraud” carries serious consequences. If you have valuable assets, the judge can appoint a trustee to dispose of them for distribution to your creditors.  If not, and you qualify for Chapter 7, your bankruptcy will be “discharged” by the judge, and you are free of the debt you have listed in your filing.  Chapter 13 BankruptcyIf individuals have steady income, and an analysis of their income shows that they have some amount to pay on debt, they must file for Chapter 13.  In this filing, the person keeps all of his/her assets and agrees to a repayment plan to creditors, usually amounting to less than the original debt amount and spread over 3-5 years.  The debt is “discharged” once the final payment is made.  Payments are usually made to a court-appointed trustee who in turn distributes the correct amounts to each creditor.Important Changes to Federal Bankruptcy Law:  In 2005, Congress passed a law intended to make bankruptcy filing more difficult.  Important parts of that law are the following:1.     Individuals must wait 8 years between two chapter 7 bankruptcies.  2.    Chapter 7 requires a “means test”, a formula for determining debt vs. income.  If there is a specific amount of disposable income, the debtor will have to file for Chapter 13.3.    Anyone filing for bankruptcy must receive a credit counseling certificate as a condition of the debt discharge. The certificate can be obtained through the internet or a phone consultation with an approved credit counseling agency.In this economy, filing for bankruptcy is common and does not carry the “stigma” it once did.  Your credit score will suffer, but there are specific things that you can do to repair that credit faster than you think. Clients who filed bankruptcy have often a better credit score one or two years later than they had before filing.

In these trying financial times, many clients are calling Shenwick & Associates and asking about pre-judgment or asset protection planning. While it is always best to do asset protection planning or pre-judgment planning as far in advance as possible, many clients are concerned about planning opportunities after they have been served with a summons and complaint or in cases where a judgment is soon to be entered. Again, it must be emphasized that pre-judgment planning should be done years in advance of a lawsuit or entry of a judgment.However, New York law does allow for some planning opportunities:1. The New York State Debtor and Creditor Law provides for a $150,000 homestead exemption (in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam counties). This allows a debtor who owns real estate to retain up to $150,000 in equity if his or her primary residence is foreclosed upon after payment of mortgages on the property. If the debtor is married, then the debtor’s partner (if he or she also holds title to the property) would also receive a $150,000 homestead exemption, for a total of $300,000.2. If a couple is in fact married, and they are contemplating a divorce, a debtor may be able to transfer non-exempt property to his or his spouse pursuant to New York State’s equitable distribution law. The granting of the divorce would be deemed consideration for the transfer of the property from both spouses to one spouse pursuant to a New York divorce.3. Whole life life insurance policies. New York State law provides that the cash surrender value component of whole life life insurance is exempt from the reach of creditors.4. A motor vehicle is exempt up to the amount of $4,000 in equity.5. A debtor may want to consider purchasing an annuity. A debtor is allowed to purchase a $5,000 annuity within six months of an action, and an unlimited amount if the court determines that that amount is necessary for the reasonable requirements of the debtor and the debtor’s dependent family. Accordingly, if a debtor is a senior citizen and/or is married and supporting minor children, exemption of an annuity greater than $5,000 may be upheld by a court.6. Finally, qualified retirement plans (401(k)s, pensions, Roth IR As, IR As, 457(b) plans for government employees and Simplified Employee Pension Plans (SE Ps)) are all deemed spendthrift trusts under New York law. Accordingly, if a debtor has an existing qualified retirement plan and a history of making payments to that plan, they may want to consider continuing to fund that plan.Pre-judgment planning is a complicated area of the law, and is heavily dependent on the facts and circumstances of each individual case. Individuals who feel that they may be in need of pre-judgment planning are encourage to contact Shenwick & Associates.

The Bankruptcy Code, which is listed in the United States Code as Title 11, has undergone various amendments since its enactment. The Bankruptcy Code ensures a well laid out legal procedure to deal with the debts of both individuals and businesses and forms a common federal law to govern all bankruptcy cases.   Typically a major part of the bankruptcy processes is carried out away from the courthouse and the debtor need to appear only once for the trustee’s meeting, which is not in a court room.   A Massive Number   The present bankruptcy law, which came into effect in 2005, offers ample opportunities for the general public to rebuild a credit score and ensure a stable future. In the current economic down turn, bankruptcy has become a common issue as  people grapple with  various issues such as massive layoffs, hospitalization expenses, or factors not in their control. In the current year, it is expected that over 1,500,000 Americans might be going through bankruptcy procedures.   The Honorable Thing   Though bankruptcy continues to be a dreadful choice for many, in reality it is a safe and legal way to start rebuilding credit history and  begin again. People burdened with debts may find bankruptcy a superlative option for putting things back in order.   Advantages of Bankruptcy Filing   There are many advantages for those who have decided to file relief under the Bankruptcy Code. Filing for bankruptcy automatically relieves obligation from paying off debts such as credit cards, unsecured loans, hospital bills, and certain types of taxes. In most cases school loans are not dischargeable. Debtors also have the option of reorganizing car (and other types of loans secured by personal property) which the debtor wishes to keep after bankruptcy filing, making payments more manageable.   Another benefit of filing for bankruptcy is the automatic stay on law suits, repossessions, foreclosures, IRS seizures, etc., which also prevents creditors from harassing borrowers for debt collection. In the event of bankruptcy cases, the borrower also obtains a respite from eviction from a past mortgage. Lastly, you can prevent  a driver’s license from being taken away for any unpaid bills resulting from a car accident.   Realistic Outcome   Often people end up in bankruptcy as they wait until foreclosure, which might leave them with little time to react and salvage the situation. If you have defaults of more than three months, or you have dues in the form of enormous medical bills, it is high time you take stock of your finances and avail professional help to set things in order. Timely intervention could go a long way in avoiding hard hitting measures such as bankruptcy, which may cost you your home!

Mounting debts and a slow economy have made the repayment of loans an uphill task for most debtors. Debts may spiral out of hand especially when faced with unforeseen incidences, such as the loss of a job or significant hospitalization. There are many options to bail you out of these tight spots, such as debt management plans, refinancing options, and bankruptcy. If assets are at rock bottom and there are no immediate solutions to make the loan payments, then bankruptcy could be the only choice for many.   Most consumers file for Chapter 7 bankruptcy which provides a fresh opportunity for the lenders as it wipes off a lion’s share of unsecured debt. Chapter 7 bankruptcy is an ideal option for those with limited or no income to pay off the severe debt they find themselves in.   There are many benefits of filing a Chapter 7 bankruptcy, which can be completed within 3-6 months from the filing date. Once the process is concluded, the debt will be removed and the lender can start afresh. This also provides the borrower with immunity from the nagging calls coming from creditors in their attempt to collect the debt as well as ending the possibilities of repossession and other foreclosure proceedings.   The Expected Process   Chapter 7 can be filed easily and typically includes the petition, schedule of debts, a statement of finances, and a listing of property and assets. Once accepted, a meeting with the trustee assigned to the case is conducted. Normally the cases are closed and the debt discharged (wiped out) within four months from the filing date. With the discharge, all debts are erased from credit history.   Chapter 7 bankruptcy is often the simplest option to eliminate debts. It is recommended to engage a lawyer who can ensure the bankruptcy papers are filled properly and the procedure of bankruptcy is completed swiftly.   A Powerful Teammate   Filing Chapter 7 bankruptcy also protects you from any collection procedures initiated by creditors, which in turn allows you to safeguard valuable possessions. Chapter 7 bankruptcy is thus designed to remove unsecured debts and is well suited for debtors with heavy unsecured debt. It’s a perfect option for those who have minimal properties, merchandise, and material objects of value but wish to retain essential items such as a car or home. Having a bankruptcy attorney by your side will help protect your financial position by showing the court chapter 7 bankruptcy is the most feasible option in combating your dues.

Filing for a Chapter 13, also known as a wage earner’s plan, can help those who have tried all the other means in ditching their outstanding debt. By filing for Chapter 13, the debtors can not only avoid foreclosure or repossessions but can also pay back a part of  their debts over three to five years depending on their income.   Home at Risk  Most people file Chapter 13 bankruptcy to save their homes. If the foreclosure proceedings are completed before filing the bankruptcy proposal the debtor can still lose his home.   Chapter 13 could be particularly useful for debtors stuck in the following situations:   Those wanting to protect their assets from liquidation. Those wishing to pay off secured debts. Debtors unable to pay their monthly mortgage payments. If a property lien far outweighs the value of your collateral. If you are unable to discharge your debts by filing Chapter 7 bankruptcy. Income is more than the prescribed limit for a Chapter 7.   By the Numbers   Anyone with regular income can file for Chapter 13 if unsecured and secured debts are not more than $336,900 and $1,010,650 respectively. Before filing for bankruptcy, you will need to complete a credit counseling course which can be done over the phone or through the internet. It takes approximately 30 minites to complete.  If you have filed for Chapter 7 earlier, you have to wait for at least 4 years before filing for Chapter 13 again in order to discharge your debt. However, in order to stop a foreclosure or repossession, you can get bankruptcy protection immediately.   As a first step for filing for Chapter 13, your attorney has to work out a repayment plan that includes all debts, which will then be submitted to the court.   The Advantages of Filing for Chapter 13   Filing Chapter 13 will make you immune to any legal action initiated against you. You can remove your debt while retaining your personal property and real estate. The debt can be paid off through an easy repayment plan based on your income. You can be relieved from the intimidating calls from collection agencies and creditors.   It is recommended that you complete documentation under the guidance of a bankruptcy lawyer because any errors while filing may result in the rejection of your bankruptcy plan. Also, if you fail to attend trustee’s meetings or don’t submit required documents the court can prevent you from filing for Chapter 13 bankruptcy.

On Wednesday November 23, 2011, friends, colleagues and family members gathered at First Baptist Church in San Marcos, Texas to remember the life of John Worthy Alvis who passed away on November 19 after a brief battle with pancreatic cancer. John practiced bankruptcy law in Austin for thirty-six years and left behind a legacy of profound respect. This post, taken largely from the eulogies given by James Hoeffner, brothers James and Thomas Alvis, and son, John Reagan Alvis, will remember a few stories about John. Please feel free to add your own in the comments section. Early Years John was born on August 22, 1945 in Austin, Texas. His son read from an autobiography an autobiography that John wrote at age ten entitled “The Amazing Adventures of Atomic Age Alvis” in which he said that he didn’t know whether he or the atom bomb made the biggest bang, but that he had been “popping off ever since.” He also revealed that he always wanted to be a garbage man when he grew up. John also had a bit of Tom Sawyer in him. Their family owned a lot which was covered in vegetation. His father offered his two older boys $11 to clear off the land. This should have required the use of a scythe and a lot of hard work and sweat. However, John found a farmer with a tractor mower who would do the job for $6 and he pocketed the difference without lifting a finger (until his father found out). John once told younger brother Tom that he would buy him a Lionel Santa Fe Super Chief if he could run a mile. When Tom, who loved Lionel electric trains, easily completed the mile, John was faced with honoring the bet. Since he didn’t have the cash, he offered to go double or nothing if Tom could run a four minute mile. Since Tom didn’t know that no youth had ever run a four minute mile (that mark was broken by Jim Ryun shortly thereafter), he gamely tried his best. He didn’t run a four minute mile and John narrowly escaped having to pay off. FBI Career After completing law school at the University of Texas in 1970, John surprised his family by joining the FBI. His fellow agents nicknamed him Special Agent McGoo because of his glasses. He once shot out the tires of a hijacked 727 as he dodged gunfire coming from the cockpit. John received a commendation from the FBI for his heroics. However, much to the astonishment of his law partners, he never displayed it. In another case of bravery, John stood guard alone at a bank with his snub-nosed .357 after he was told that robbers were en route. One of the less glamorous aspects of being a G man was picking up draft dodgers. One time John and a particularly obnoxious partner were dispatched to the poor side of town to look for a man at his parent’s house. When the boy’s mother answered the door, the aggressive agent went into his Barney Fife routine demanding to know where he was. Pointing to a closet beneath the stairs, he demanded to know what was in there. The following exchange took place: “Oh sir, you don’t want to go in there.” “Why, you hiding something?” “You don’t want to go into that closet.” The agent smugly replied, “Because your son is in there” and forced his way past. When he opened the door and pulled the light switch on, he found more cockroaches than in an Indiana Jones movie. As roaches began to cover the startled agent, the mother said, “I told you you didn’t want to go in there.” John said that it took all of his self-control not to burst out laughing. According to Jim Hoeffner, “John was a lover of justice whether it was federal court justice or cockroach justice.” Law Practice in Austin In 1975, John’s father died. John took a sabbatical from the FBI to return to Austin to clean up his father’s files. John never returned to the FBI and instead took up his place in his father’s firm Alvis & Carssow (later Alvis, Carssow & von Kreisler and Alvis, Carssow & Ingalls). Jim Hoeffner remembered “We always had fun at Alvis, Carssow & von Kreisler practicing law and visiting in general. John was always the first to laugh and always had a pleasant disposition.” He also said, “Unlike Marcellus in Pulp Fiction, if you did something wrong to him, he did not go medieval on you.” According to James Alvis, “The practice of law was his passion in life. . . . He genuinely liked to help people, to give the ordinary person an even break.” However, John was not without his faults. His one shortcoming was sending out monthly bills and billing for what he did. When Jim Hoeffner joined the firm, he was told, “You get John to bill on a monthly basis and I will immediately make you an equity partner.” On another occasion, when John was president of the Travis County Bankruptcy Bar and the names of the nominees for director positions were being read, a woman lawyer demanded to know “is there any reason why there are no females on the ballot.” Without batting an eye, John replied, “Because our bylaws prohibit that.” While this answer was not politically correct and also not true (our bar has had many female council members and several female presidents), it showed a mischievous side to his personality. Final Days John’s battle with pancreatic cancer was brief but intense. His brother James noted that John had a few minor stomach pains on Labor Day and was gone before Thanksgiving. He said that John’s passing was a “reminder of our own mortality” and that, “all we really have is the life we make today.” However, in his illness, he continued his interests. John was a huge nature lover. When told that a fox had been seen in their yard, he wanted to know “red or gray?” When his colleagues insisted that he sign a Durable Medical Power of Attorney, he was asked, “John, do you know what a Durable Medical Power of Attorney is?” In response, he started making choking motions around his throat, indicating the indignity of having to read another legal document. Nevertheless, through the fog of the pain medication, he read through line by line. He checked off the box for no heroic actions to sustain his life, but when it came to terminating food and water if he was in a coma, “being the independent, ever hopeful, did not approve of this provision.” John passed away on November 19 at 10:45 a.m. in his own bed in the arms of his wife. His breath became more shallow until it was gone. According to Mr. Hoeffner, “He died in peace, the same way he lived.” Comments from Colleagues Since John’s untimely passing, many of his colleagues have remarked about his life. Here are some of their comments. Please feel free to share your own. I very much remember John and consider him one of the very best. He had a great disposition, was always courteous and respectful to all participants and their legal counsel, was well informed on the facts and the law and I considered it a privilege to be able to work with lawyers when they were of that caliber. I know he will be missed by all of his friends and family and I will miss him also. --Former U.S. Bankruptcy Judge Larry Kelly John was a superb attorney with a first-rate temperament. I remember dealing with him during my first week of practicing law, and my first impression was that John was one smart and stellar guy. Needless to say, my positive impression never changed; indeed, my respect and admiration for him grew each time I dealt with him (and he and I were almost always on adverse sides). To say that his passing is a loss is a woeful understatement; and it is no overstatement to say that his departure leaves a huge void in the Central Texas bankruptcy bar in particular and the Central Texas community in general. --U.S. Bankruptcy Judge Jeff Bohm As the many e-mails have indicated, the Austin Bankruptcy community has lost a true gentleman and friend. He will be sorely missed. --Yvonne Knesek, President, Austin Bankruptcy Bar I had the privilege of being a law clerk for John while still in law school and before passing the bar exam. He was one of the kindest and most honorable men I have ever met. I am glad to have known him and sad at his passing. --Craig Smith He was the most professional attorney I ever met. God love him. --Steve Turner

Every member of the military must apply for a personal military security clearance.  A person entering the military does not automatically receive a security clearance; it must be formally applied for and granted.  Along with relevant personal data, the security clearance application requires specific disclosure about financial delinquencies, which include personal Chapter 7 and Chapter 13 bankruptcies occurring within the last seven years  It usually takes over a year from the time of security clearance application to successful granting of the security clearance.  A good portion of this time may be the investigation stage of the approval process.  During the investigation stage a credit check is performed.  If a credit problem (such as bankruptcy) is discovered, further investigation is performed which may include requests for additional information and interviews.  A PRSI, or Personal Subject Interview, is a regular part of the security clearance process which all applicants, regardless of credit history, must complete.  Grounds for denial of security clearance include being found to have serious, repeated financial problems or intentionally giving false statements regarding your finances.  A security clearance is usually successfully granted if one can honestly present plausible reasons for financial problems in the past, including a bankruptcy.   Financial mitigation of security concerns includes the following:   behavior that happened long ago or infrequency; financial problems outside of one’s control, such as illness or loss of a job; good faith efforts to repay debts; evidence of successful counseling for past issues; and sudden affluence from a legal source of income such as an inheritance.    On the other hand, if there are repeated bankruptcies or ongoing financial problems that are not resolved a security clearance will most likely be denied.  Often times it has been reported that underlying unacceptable actions in the eyes of the military, such as alcohol, drug or gambling problems, result in denial of the security clearance.  In addition, frivolous or irresponsible spending and an unwillingness to pay debt (as well as fraudulent or illegal financial practices) can also be cause for denial of a security clearance.   Conclusion:  If you are truthful and specific on your military security clearance application you will most likely not be denied a security clearance if the reasons that led you to bankruptcy have been eliminated.

Oftentimes folks wait until they've spent every last penny they have before contacting a lawyer regarding bankruptcy. This seems like common sense: You go broke and then you go bankrupt. However, this is not how you should go about it. There's a saying that goes, "Bankruptcy is not for people who are broke. Bankruptcy is a process that costs money and therefore you don't want to wait until you are without funds". Go figure!So what is a person in financial trouble supposed to do exactly? This depends on your particular situation. Situation 1: You still have some savings. In this case the smart move is to take an honest look at your budget. Calculate the number of months you have left to burn through your cash while living and paying your ongoing bills and contact a bankruptcy lawyer a few months before the end of this period. If bankruptcy is recommended to you, the lawyer will be able to acquire his fee out of the funds you would have otherwise spent on bills and help you get a break from the ongoing need to pay debts. If the lawyer advises bankruptcy is not a good idea for you, then you can go about your regular business. Situation 2: You have no savings, have significant debt, and now you lost your job that's been keeping you afloat. Unless you can rebound and find another job quickly, you need to start thinking about obtaining a source of funds to start the bankruptcy process. One source of funds may be your tax return. Another source is to borrow the money from a family member or a really close friend. After the bankruptcy case is closed you are not legally bound to pay them back, but that does not mean you can't pay them back if you choose. Situation 3: Same as situation 2, however you don't have a big tax return coming or you can't ask any family members for the money to start the bankruptcy process. All is not lost. You will have to stop paying your bills and start saving whatever you can for the bankruptcy. This can be done by taking a job or two at a much lower pay rate and save whatever you can for the bankruptcy. Some lawyers, like myself, recommend payment plans to help make this a bit easier, but you must finish the payment plan before your case can be filed. Why? This is true for all lawyers because continuing a payment plan after a Chapter 7 bankruptcy case is filed is illegal.Conclusion: Do the smart thing and seek out a bankruptcy lawyer where you live to consult with before you run completely out of money. The attorney can give you free advice and help you decide if Chapter 7 or Chapter 13 bankruptcy is an option for you.

Plenty of my clients are worried about where they will live if they file for personal bankruptcy and hand over their (usually far under water) house. They've heard horror stories about people with bankruptcies being incapable of finding a place to rent. But things aren't as horrible as they fear.My usual recommendation is to not check out the traditional large apartment complexes. Many will, indeed, decline applicants possessing a recent personal bankruptcy on their credit.Much more inclined to rent are private landlords. They are usually far more concerned about you, the person, than about your credit. A good job and first and last month's rent are often sufficient to satisfy these landlords.Another option is a "Lease with Option to Buy," or LWOB. A LWOB gives one who has filed for bankruptcy more than a few advantages. First, you are usually able to get a nicer condo, townhouse or single family home than what would ordinarily be available for rent. Second, the owner usually offers the LWOB because he or she can't sell the property and is actually desperate for cash flow. The owner often cares much less about poor credit and the bankruptcy. Third, you are locking in the possible purchase of the property at today's lower prices, rather than the price the property might sell for in 2-3 years. And finally, you are developing a considerable down payment if you decide to buy the property later. "Lease with Option to Buy", or LWOB, typically involves three provisions in addition to the usual rental clauses:1. You have the first right to buy the property at some point in the future (usually 2 or 3 years);2. Some (or all) of the monthly rent payment is credited towards the purchase price if you decide to buy the property.3. You can set the purchase price at the beginning of the lease.