Category Archives: Bankruptcy

Making Cents of the Bankruptcy Code Part II

Making Cents of the Bankruptcy Code, Part I

Part II: A More in-Depth Look

Chapter 7 Bankruptcy: Liquidation

 Filing Fee $335

Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts. Debtors whose debts are primarily consumer debts are subject to an income test designed to determine whether the case should be permitted to proceed under chapter 7. To determine whether or not you will qualify under Chapter 7, you should contact an experienced Kansas City bankruptcy attorney at Reneau & Shernaman for a free consultation.

Under chapter 7, a debtor may claim certain property as exempt under governing law. A trustee may have the right to take possession of and sell the remaining property that is not exempt and use the sale proceeds to pay some of the creditors.

  • Advantages:
    • Relatively inexpensive and quick.
    • Discharge unsecured debts such as credit cards, personal loans, lines of credit, payday loans, car/house loan deficiencies, income taxes (if older than 3 years old and no tax lien), medical bills, utilities, etc.
    • Stops collection efforts, garnishments, repossessions and state court actions to recover money 
  • Disadvantages:
    • It is possible that you may not get to keep all of your assets. The best way to find out for sure is to contact contact an experienced Kansas City bankruptcy attorney at Reneau & Shernaman for a free consultation.
    • Also, if a creditor can prove that a debt arose from fraud, breach of fiduciary duty, or theft, or from a willful and malicious injury, the Bankruptcy Court may determine that the debt is not discharged will therefore survive the Bankruptcy 
Chapter 13 Bankruptcy Reorganization

Filing fee $310

Chapter 13 is designed for individuals with regular income who find it beneficial to pay part of their debts in installments over a period of time. An individual’s ability to qualify for Chapter 13 is contingent upon many things. To determine whether or not you will qualify under Chapter 13, you should contact an experienced Kansas City bankruptcy lawyer at Reneau & Shernaman for a free consultation.

Under Chapter 13, the debtor must file with the court a plan to repay creditors all or part of the money that is owed, using the debtor’s future earnings. The period allowed by the court to repay the debts may be three years or up to five years, depending upon the debtor’s income and other factors. The court must approve the plan before it can take effect. In the vast majority of Chapter 13 cases, the debtor pays only their secured and priority debts.

  • Advantages:
    • Debtors usually get to keep their assets, with few exceptions.
    • Stops foreclosure sales, collection efforts, garnishments, repossessions and state court actions to recover money
    • Mortgage or Auto Arrearages can be cured over the life of the Chapter 13 plan
    • Car payments restructured to be paid over course of the Chapter 13 plan – for many filers, that results in smaller monthly car payments
    • Taxes can be repaid without penalties accruing and at a discounted interest rate
    • Discharge unsecured debts such as credit cards, personal loans, lines of credit, payday loans, car/house loan deficiencies, income taxes (if older than 3 years old and no tax lien), medical bills, utilities, etc.
    • Stops collection efforts, garnishments, repossessions and state court actions to recover money 
  • Disadvantages:
    •  More expensive than Chapter 7.
    • The process is far more lengthy than a Chapter 7.
    • Discharge is not entered until all plan payments are made in 3 to 5 years, depending on your plan length. This means you are not officially “done” with your obligations to repay until you make it to your final payment. 
Chapter 11 Bankruptcy Reorganization 

Filing fee $1,717

Chapter 11 is designed for the reorganization of a business but is also available to individual debtors. Chapter 11 is the only reorganization alternative if the debtor has debts above the Chapter 13 eligibility maximums. There is no legal maximum duration for a Chapter 11 plan. Creditors have the right to vote on whether to accept a debtor’s plan, and also have the right to propose their own plan. Debtors can not sell assets without the Court’s permission. Debtor’s can only keep a checking account at a bank that meets certain standards, and must identify themselves as “Debtors in Possession”, Debtors must obtain a federal tax ID number. Debtors must file monthly operating reports with the Court and they must pay a quarterly fee to the Office of the U.S. Trustee. After the Chapter 11 case is filed (usually within a week) there is an initial debtor interview with a member of the U.S. Trustee’s office where many of the rules of operation are explained to the debtor.

  • Advantages:
    • Debtors usually get to keep their assets, with few exceptions.
    • Allows for many of the same advantages as a Chapter 13. 
  • Disadvantage: Significantly more expensive than both Chapter 7 and Chapter 13 because a Chapter 11 requires more time and effort from both the debtor and the attorney. 
Which Chapter of Bankruptcy to Choose 

Which Chapter to choose will depend on several factors, not the least of which is your particular goals. For instance, if you qualify for Chapter 7 and your goals do not include keeping your house; Chapter 7 may be the best choice. If, however, you want to keep your house and although you qualify for Chapter 7, a Chapter 13 may be the better option if you need help catching up on your house payment.  Or, if you want to keep your house and you do not qualify for Chapter 13 for whatever reason then Chapter 11 may be the best choice. To help determine under which Chapter of the Bankruptcy Code you should file, contact an experienced Kansas City bankruptcy attorney at Reneau & Shernaman for a free consultation.

Bankruptcy Means Testing

The following is written mostly in legalese for those who are really interested in knowing the technical parts—don’t worry this is what would be handled by your experienced attorney at Reneau & Shernaman.

Section 707(b) of the Code allows the Bankruptcy Court to dismiss a Chapter 7 case filed by a debtor whose debts are primarily consumer debts if it finds that the granting of relief would be “an abuse of the provisions of this chapter.” It then goes on to create presumption of abuse where the consumer debtor’s Current Monthly Income (CMI) minus allowed expenses exceeds the state median income for the debtor’s household size.

In order to complete Form B22 (the Means Test) accurately, the following documents and information should be present: sufficient pay stubs and other evidences of income to determine Current Monthly Income (“CMI”); Schedules A-J and Statement of Intention accurately completed; documentation of special circumstances that evidence justification for taking expenses that exceed the IRS standard deduction.

Section 101(10A) defines “current monthly income” (CMI). CMI includes the debtor’s total income from all sources (except social security benefits), for the six months ending in the month prior to the month of the bankruptcy filing. CMI also includes any amount paid by any other entity toward the debtor’s household expenses on a regular basis.

Code Section 101(39A) defines Median Family Income (MFI) as the median family income calculated and reported by the Bureau of the Census in the most recent year, or as most recently adjusted. The Census Bureau publishes figures for each state, for families of household sizes from one to five. Enter the Debtors’ state of residence and household size. Then, obtain the amount of the state median income for a household size of the debtors (www.usdoj.gov/ust/). The state median income in Missouri, at the time of this writing, is $41,092 for a household of one; $51,784 for two; $59,549 for three; and, $72,150 for four. Add $8,100 for each individual in excess of 4.

If your income places you below the median the Means Test calculation need not be performed. The Means Test calculation must be performed if your CMI exceeds the median income.

The remainder of the Means Test, for above median debtors, deals with deductions from your income. Some of the deductions are established by IRS standards, some are established by actual expenses, and some are a blend. A presumption of abuse arises under Section 107 if, after deducting allowable expenses from your income and multiplying the difference by 60, the result is the lesser of $10,000 or 25% of general unsecured debt, as long as that 25% is at least $6,000.

Using this calculation:

1)      There is a presumption of abuse if the resulting figure is $10,000 or more, and the debtor has more than $40,000 in general unsecured debt;

2)      There is a presumption of abuse if the resulting figure is $6,000 or more, and the debtor has more than $24,000 in general unsecured debt; and,

3)      There is a presumption of abuse if the debtor has $24,000 to $40,000 in general unsecured debt and the resulting figure is 25% of the amount of that general unsecured debt.

4)      The court may still find the filing to be abusive based on the totality of the circumstances pursuant to Section 707(b)(3)(B), where there is no presumption of abuse.

Conclusion

Ultimately, debt can be stressful and will lead to financial ruin if left unchecked.  If you or someone you know is troubled by debt, consider that you may have legal options available to you to help eliminate or handle your debt.  For a free consultation with a Kansas City bankruptcy attorney, call Reneau & Shernaman at 816-287-8080 today.

 

Making Cents of the Bankruptcy Code, Part I

Various Bankruptcy Proceedings
& Eligibility

Part I: Brief Overview

There is a lot of confusion and apprehension about filing bankruptcy. Some people believe they will lose everything they own. Others think they can keep everything and still get rid of all of their debt. Just like anything else, the truth lies somewhere in the middle. It all depends on your unique situation and how the bankruptcy laws apply to you. In this article I will explain the bankruptcy process, and in the process dispel some of the myths surrounding bankruptcy.

Definitions & Explanations

There are two basic types of bankruptcy cases: liquidation and reorganization. A Chapter 7 deals with liquidation proceedings whereas Chapters 11 and 13 deal with reorganizations.

A liquidation is the sale of your property that cannot be exempted (protected). If most or all of your property falls under the “exempt” category then no sale takes place.

A reorganization usually consists of a plan to pay creditors at least a portion of their debts over an extended period of time.

A debtor is a person who owes a debt.

A bankruptcy discharge removes a debtor’s obligation to repay certain debts. This is often just referred to as “discharge.”

A Chapter 7 is designed for debtors in financial difficulty who do not have the ability to pay their existing debts.

A Chapter 11 deals with reorganizations of businesses and individuals.

A Chapter 13, commonly known as “Wage Earner Plan” or “Payback Plan,” deals with the reorganization of individuals with regular income.

Why Would Someone Want to File?

Typically, the objectives in filing bankruptcy are to relieve financial stress, keep the house and/or car, stop garnishments and collection actions against the debtor and the debtor’s property, and/or to obtain a discharge of existing debts. With few exceptions, all bankruptcies stop collection actions against the debtor and the debtor’s property.

Regardless of the motivation or circumstances that drive a debtor to bankruptcy, the ultimate goal is to receive a bankruptcy discharge. There are some particular debts that cannot be discharged: most taxes; student loans; debts incurred to pay non-dischargeable taxes; domestic support and property settlement obligations; most fines; penalties; forfeitures; criminal restitution obligations; certain debts that are not properly listed in the bankruptcy papers; and debts for death or personal injury caused by operating a motor vehicle, vessel, or aircraft while intoxicated from alcohol or drugs.

If a debtor is found to have committed certain kinds of improper conduct described in the Bankruptcy Code, the court may deny the discharge.

To determine whether or not bankruptcy is right for you and whether or not your debts will qualify for a discharge, you should contact an experienced bankruptcy attorney such as Reneau & Shernaman for a free consultation.

Part II: A More in-Depth Look 

 

 

Dealing with Tax Debt: 7 Solutions From A Kansas City Tax Attorney

The stress that comes from trying to meet tax-filing deadlines is only the beginning for some taxpayers. And if you find yourself owing taxes that you can’t afford to pay at the filing deadline, you are already aware of the additional stress that can come from owing delinquent taxes. Fortunately an experienced Kansas City tax attorney can help you find solutions that can ease the stress that comes from owing back taxes.

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Kansas City Tax LawyerThe law has given taxing agencies unique authority to pursue and collect from individuals and businesses that owe tax debt.  And if delinquent taxes get out of control, your state’s Department of Revenue and the IRS can garnish wages, levy bank accounts, assert liens, and even seize your property – all without your permission.  So what are some of the options you have if you find yourself or your business owing taxes you can’t pay?  The Kansas City tax attorneys at Reneau & Shernaman can help. Before you give into the threatening letters, and surrender to the demands of the taxing authorities at face value, consider that you may have legal options available to you.  Consider these 7 options for dealing with delinquent tax debt:

  1. Do Nothing.  While in some civil matters doing nothing can be a viable option to let cooler heads prevail, this is rarely the case when you are facing a balance owed to the IRS or your state’s Department of Revenue.  Not only will the taxing authorities employ all sorts of uncomfortable measures to collect back taxes, the longer an individual or business waits to deal with delinquent taxes, the higher the balance owed becomes due to compounding penalties and interest that would make a credit card company blush.  Unless you are certain a taxing authority has stopped trying to collect on your tax debt, doing nothing is not a good option.

  2. Reduce or Eliminate the Tax Debt. In some circumstances, the law allows for aggressive means to reduce or even eliminate tax debt.  With the help of an experienced Kansas City tax attorney, individuals and businesses are often able to facilitate a successful reduction with the IRS or state Department of Revenue.

  3. Postpone the Tax Debt. In many cases, the Kansas City tax attorneys at Reneau & Shernaman can help you or your business legally postpone the collection and enforcement activity of the IRS or state Department of Revenue.  This option can be a lifesaver for the individual or business that just needs time to get their cash flow back up enough to pay the tax debt off at a later time when they can afford to do so.

  4. Bankruptcy. A common misconception with back taxes is that tax debt cannot be included in a bankruptcy, or that the tax cannot be fully discharged in a bankruptcy.  While some circumstances dictate that tax debt may not be fully dischargeable, in many cases, tax debt can be eliminated completely, or restructured into more manageable terms for the taxpayer.  Because the bankruptcy code is fairly complicated, be sure and consult with one of the Kansas City bankruptcy attorneys at Reneau & Shernaman before proceeding with this option.

  5. Challenge the Assessed Amount. Taxing authorities can make mistakes too.  But challenging an assessed amount of tax debt after an IRS audit, or substitution assessment can be extremely complicated and risky if you don’t know what you are doing.  Done without the protection of a Kansas City tax attorney, a misplaced challenge to an assessed tax debt can be used against you and even have the effect of becoming an unintended audit.  Bottom line — a challenge to an assessed tax debt can be a very effective tool to reduce your tax liability, but be sure you consult with a Kansas City tax attorney before you attempt this option.

  6. Negotiate an Installment Agreement. For many taxpayers, the Kansas City tax attorneys at Reneau & Shernaman can work out an agreement with the IRS or your state’s Department of Revenue to pay off the delinquent taxes over a period of time.  The IRS permits pre-determined budget limits for various routine expenditures when calculating whether or not a taxpayer can qualify for an agreement.  With help from an experienced tax attorney, these standard monthly expense amounts can be maximized to work out the best possible outcome in negotiating an installment agreement and even postpone collection indefinitely.

  7. Settlement. Occasionally it is in the best interests of both the taxing authority and the taxpayer to settle the tax debt all at once with a lump sum payment.  This option can work wonders for the individual or business whose circumstances qualify them for this option.

Ultimately, delinquent tax debt can be stressful and even lead to financial ruin if left unchecked.  If you or someone you know owes taxes you can’t afford, consider that you may have legal options available to you to help reduce, postpone, or even eliminate your delinquent tax debt.  For a free consultation with a Kansas City tax attorney, or call Reneau & Shernaman at 816-287-8080, today.

Choosing-a-Bankruptcy-Attorney

That’s it, you’re done. After struggling to pay your debts, you’re ready to consider bankruptcy. It’s time to contact a bankruptcy lawyer, but which one? How do you know where to look?  Many advertise on TV and radio, others on billboards and bus stops. They seem nice, have a perky smile, and claim to be there to help you, but you can’t tell for sure. Asking friends for a recommendation is a rather awkward proposition. A discrete online search, maybe?

Bankruptcy Attorney holding credit cards in handFinding the Best Solutions to Your Situation Will Depend on How Well Your Attorney Understands All of the Complexities of the Bankruptcy Code

(image courtesy www.freefoto.com)

Filing for bankruptcy is a serious step, requiring excellent advice and the right representation. In 2005 the Bankruptcy Code was rewritten into what now is often referred to as

“Unquestionably, [the] most poorly written piece of legislation that I or anyone else has ever seen,” – U.S. Bankruptcy Judge Keith M. Lundin, “No one has ever seen a piece of garbage like this,” he adds. “There’s going to be the most fantastic anarchy in bankruptcy courts for years.”

This has resulted in a very highly specialized area of the law which is best left to knowledgeable practitioners. Time and again I watch as attorneys inadequately represent their clients. Giving their client poor advice or causing the client to lose their property.

Beware the Bankruptcy Mill

Bankruptcy mills have began to crop up in Kansas City. Bankruptcy mill attorney ads are all over television.  They bring you in, and churn your chapter 7 or chapter 13 case through.  Are your personal finances unique?  Are they different from your neighbor?  That is not how the bankruptcy mill views you.

The bankruptcy mill is interested in you for what you can do for them. Their job is to crank out the maximum number of cases each month and often do so with as little specialized attention as possible. Often times these firms push their attorneys to file a minimum number of cases each month, or to maintain a minimum closing ratio. I have heard horror stories from clients with improperly filed bankruptcies from these bankruptcy mills. Stories ranging from clients whose debts are deemed non dischargeable due to the attorney’s inadequate litigation skills, to the Debtor who has lost their home due to the attorney’s inattention to detail.

Signs That You are Dealing With a Bankruptcy Mill

  • The firm boasts about how many cases it files  While the firm may claim this is an indication of success, it is the most obvious statement that you are just another number to them. 

  • If you call and can’t speak to an attorney – When your first interaction with a firm is with a staff member, and there is no attorney willing to discuss your personal circumstances, this is an indication of future interactions with the firm. The bankruptcy mill employs plenty of people to answer their phones, however none of them are attorneys.

  • Your attorney doesn’t attend your creditor’s meeting – If you are dealing with a bankruptcy mill, it is likely that you already know by this point. Your fears will be further realized when the person you thought was your attorney, is in fact not the person who represents you at your meeting.

  • The only option you’re told about is to file bankruptcy – Often times, a client may come to see me and they have more attractive options other than bankruptcy. A good bankruptcy attorney knows all the alternative options and will share them with you.

  • High turnover of attorneys and staff members – If you notice your bankruptcy firm often has new employees this should be a giant red flag. A bankruptcy mill often treats its employees just like its clients; just another number. If the firm treats its employees poorly, how do you think they treat their clients?

You don’t have to settle for such impersonal and non-attentive treatment from your bankruptcy lawyer. There are firms out there where experienced bankruptcy attorneys take their time meeting with you, evaluating your case, protecting your assets, and returning your calls promptly. I know this because Reneau & Shernaman is one of those law firms.

Bankruptcy is a stressful event for most people and your attorney should seek to lessen that stress by answering your questions quickly and being available throughout the process. Please contact us at 816-287-8080 for the immediate and personal attention you deserve. Choosing-a-bankruptcy-attorney.

How Will Bankruptcy Affect my Credit

One of the most common questions I am asked when sitting down with a client is, “How will this affect my credit?” The common myth is that a bankruptcy will ruin an individual’s ability to obtain credit in the future. While the filing of a bankruptcy will have an effect on your credit, many of my clients find themselves pleasantly surprised at how quickly they bounce back, and at how bankruptcy helps them get their finances back in order.

In the majority of cases your credit score has already taken a hit from the debt obligations which you have been unable to pay (payday loans, personal loans, vehicle payments, mortgage, medical bills, credit cards, etc.) Falling behind on these obligations will cause your credit score to take a plunge, however most of my clients find that the filing of a bankruptcy can stop the bleeding.  Once the bankruptcy is filed, your creditors are no longer able to report your pre-filing behaviors to the credit bureaus. This means, that the negative reporting ceases immediately.

While the formulas the credit bureaus use to calculate an individual’s credit score are a closely guarded secret, it is common knowledge in the credit industry that a considerable portion of your credit score is made up of your outstanding debt. Many times you hear this referred to as your debt to income ratio. This value depicts an individual’s ability to repay a loan. With a host of outstanding bad debts, your borrowing future is limited; however upon your bankruptcy discharge your old outstanding debts are gone, thereby allowing you to incur new, and more productive, debts.

A lot of my clients are shocked when they begin to receive credit card and vehicle offers soon after discharging their bankruptcy. This is typical, and is a result of the credit industry viewing you as a good bet. After all, you have just completed credit counseling, financial management, and are not eligible for another discharge for at least four years. Typically your credit score after bankruptcy will be better within a year, than before the bankruptcy.

If you are looking into bankruptcy and would like to know what more we can do for you, please contact the helpful attorney’s at Reneau & Shernaman today! Call us at 1.816.287.8080.

Making the Complicated World of Law Less Complicated

At Reneau and Shernaman, Attorneys at Law, our goal is to make the complicated, less complicated. We know the law can be confusing and unclear without a professional to help you sort through the legal terminology and get to the point. That’s where we come in. Not only are we experienced, we are excellent at listening. We sit down with you and get the details so we can understand your goals and show you the easiest and fastest way to achieve them.

All of the areas we focus on are sensitive. People considering bankruptcy are usually in an unpleasant place in their lives. Personal injury victims can be experiencing a great deal of pain and suffering. Family law usually involves strong emotions. And if you need a criminal lawyer, you may have made some unfortunate decisions that got you into trouble. No matter what kind of legal representation you need, Reneau and Shernaman can provide it and make it as painless as possible.

We take the time to explain everything clearly to you so you are aware of the legal consequences and choices. We do everything within our power to make the law work in your favor. We even make house calls for personal injury clients who are unable to get to our office as a result of their injuries. RS Law doesn’t stand for Really Simple, but it could. When you want a lawyer who takes the time to make sure you understand the law and who will make the law work in your favor, call us at Reneau & Shernaman. We make the complicated, less complicated. Making-the-complicated-world-of-law-less-complicated.