THE CHAPTER 7 - 341 MEETING
Generally, the chapter 7 341 Meeting lasts only a few minutes. You will be "under oath" meaning that you can be prosecuted for perjury if you willingly lie. You will be asked if the documents that you filed with the court are true and correct and if there are any changes that need to be made. You will be asked what caused your financial condition or why you filed bankruptcy. Give the "short" version. Don't answer a question that hasn't been asked — ask your attorney if you should elaborate before doing so.
The dress code for the 341 Meeting is usually "business casual" whereas a court hearing is more formal. Your attorney may not even wear a coat and tie. In court, your attorney will always wear a coat and tie.
If you have any other questions about your 341 Meeting, ask your attorney before you attend.
401K PLANS CANNOT BE TOUCHED BY CREDITORS
- If you draw down the 401k early, you will owe penalty and taxes. Under most circumstances, these taxes will not be discharged if you file a bankruptcy. That means that even if you file bankruptcy, you will still owe the taxes;
- As a general rule creditors can not attack your 401k plan;
- As a general rule, if you file bankruptcy, you will not lose your 401k plan.
Therefore, it seems rather silly to use your 401k plan to pay your creditors unless you are absolutely positive that doing so will solve all of your financial problems.
Before drawing on your 401k please consult with a knowledgeable attorney.
YOU DO NOT HAVE TO PAY EVERYONE IN CHAPTER 13
1. If you are in a chapter 13 to catch up on your mortgage, car or other secured debts, you must pay the amount sufficient to do that. Likewise, if you are in a chapter 13 to pay off delinquent taxes, you must pay the amount sufficient to do that.
2. In a chapter 13, you pay at least an amount determined by a formula similar to the "Means Test" in a chapter 7. The formula is calculated by determining your gross monthly income (no deductions for taxes, insurance or anything else) less certain allowable deductions. You must make payments for 60 months unless your gross income is less than the state median income for a family of your size. If you are below the median income, they you are only required to make payments for 36 months.
3. When all of the payments required above are made, you receive a discharge. This releases you from most remaining unpaid obligations.
NOTE: There is no requirement that any credit cards or other unsecured creditors be paid anything as long is the above formula is met and paid. They are still discharged on completion of the plan.
TEN IMPORTANT THINGS ABOUT YOUR CASE
Some questions come up more often than others. After much thought and consideration, I decided to make a list of the what I thought may be the ten most important things my clients should know about their bankruptcy. This list may change from time to time but here they are.
TEN IMPORTANT THINGS ABOUT YOUR CASE
1. You have to be honest. Schedules are filed under oath. The penalty for lying can be up to 5 years in the pen. We will not visit you.
2. You must cooperate with us and timely provide all requested information and attend all scheduled meetings. If you are too busy to assist us, we will not be able to help you.
3. The petition starts the case. It and other documents require your signature. These are formal documents and not the worksheets that we have you fill out. Without your original signature on the formal documents, we cannot file them. Therefore, if you have not signed the formal documents, your case has not been filed even if you have deposited a payment with us.
4. Things can happen fast in bankruptcy cases. Make sure that we know how to reach you at all times and return calls as soon as possible.
5. You must take a credit counseling course both BEFORE and AFTER your case is filed. That’s right, there are two of them. You cannot file without the first and you do not get your discharge without the second.
6. Some transactions can be undone in bankruptcy.
a. If you transfer something to someone else and get little or nothing in return, a bankruptcy trustee can sue the person you transferred it to. Also you may not be able to get a discharge if the Court thinks you tried to hide the asset from creditors. Worse, you can go to jail if the Court thinks you tried to hide assets from the trustee.
b. If you repay a loan from a relative within one year of bankruptcy, that relative may be sued by the bankruptcy trustee. If you repay any other creditor within 90 days of filing bankruptcy, that creditor may be sued by the bankruptcy trustee. Although the creditor may have to give the funds back to the trustee, you do not get in trouble for paying your legitimate debts.
7. Your bankruptcy discharge only discharges you. It does not apply to any debt that your spouse may have signed for. However, Texas is a “community property” state; not a “community debt” state. If your wife did not sign, she is generally not liable for your debts. On the other hand, we generally charge no more handle a husband and wife case than just one spouse if they are filed as a joint case.
8. Some debts are not dischargeable. The most notable ones are:
a. Child support and alimony;
b. Student loans;
c. Most (but not all) taxes;
d. Debts incurred through fraud. A common example is a “run up” of a credit card in the months prior to filing bankruptcy.
9. Please feel free to call if you have any questions about your case. If we cannot take the call immediately, your call will be returned. However, generally multiple calls a day are not acceptable. Please try to accumulate your questions so that we can answer them all at once. That way, we will have time to answer our other clients’ questions as well. Email is also good. Email to
mail@lusky.com comes to the entire staff.10. You can follow your case and get copies of all filed documents on PACER. You must register at
http://www.pacer.gov/reg_pacer.html. The cost is currently $0.08 per page (up to a maximum of $3.20 per document) but if you spend less than $10.00 per quarter, it is usually free.Debtors Need Not Apply (at least in Texas)
CONFIDENTIALITY AND THE “THIRD PARTY RULE”
Most clients expect that their conversations with their lawyer are confidential and cannot be compelled to be disclosed. This is known as the “attorney-client privilege.” While the privilege generally applies to conversations between the attorney and client, there are exceptions.
One of the most common exceptions is the “Third Party Rule.” Many clients will want to meet with their attorney with their best friend or family member present. Unless that third party is a husband or wife, the presence of the third party may destroy the privilege. That means that both the attorney and the client could be required to disclose the content of the conversation. Therefore, if you are going to discuss matters of a sensitive nature, you should ask your friend to wait outside.
While this exception exists, it may not be that important in a bankruptcy context. Most of what you will discuss will be in preparation of the documents that will be filed in the bankruptcy court. These documents are filed under oath and are a public record. Your attorney will advise you to tell the complete truth in these documents and should not assist you in falsifying them. To do so would subject both you and your attorney to criminal penalties of up to five years in prison. It would also trigger another exception to the attorney-client privilege known as the “Crime-Fraud Exception.” Conversations with your attorney to commit or plan a crime or fraud are not protected.
With all of the above in mind, I usually tell my clients that unless they are going to confess to being an ax-murderer, it will probably be ok for their friend to attend. However, they must understand that while I will not willfully volunteer any information about the conversation, I can be compelled to do so.
If you have any questions about the confidentially of your meetings with your attorney, please discuss it in private.
Credit Card Numbers Decoded
The first 6 digits are the issuer identification number. Cards can be looked up by this number. For example —1 and 2 are airlines3 is travel and entertainment4 and 5 are banking and financial6 is merchandising and banking7 is petroleum8 is telecommunications, and9 is National Assignment
The 7th and following digits except the last digit are the person's account number.4xxxxx is Visa51xxxx through 55xxxx is Mastercard
Discharge Taxes in Bankruptcy?
- They must be for a tax year for which the return was due more than 3 years prior to filing bankruptcy. Example: Today is March 11, 2011. Taxes for the year 2007 were last due on April 15 or October 15 (extension date), 2008. Therefore they meet this timeline.
- The tax return must have been actually filed by the debtor and have been on file with the IRS for at least 2 years.
- Any assessment the IRS makes must be at least 240 days old plus any time an offer in compromise was outstanding.
- These times may be extended for any period in which the debtor was previously in bankruptcy.
Some taxes are simply not dischargeable — for example, taxes assessed against you for taxes you withheld from your employees.
A NOTE ABOUT LIENS. If the IRS or other taxing authority has filed a lien, the property to which the lien attached (e.g. your homestead) may not be discharged even if you are. That means that the IRS or other taxing authority may take the collateral even if they could not take anything else from you.
Be sure to talk to your lawyer about taxes.
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Can Collective Union Action Force Mortgage Modifications?
Congress has been unable to pass any legislation that would allow for effective modification of mortgages. And the HAMP program is failing miserably. Two New York unions, however, have come up with the idea that collective action through the market may get the needed results. The heads of the Transport Union Workers and the United Federation of Teachers in New York are urging their pension fund trustees to sell stocks and bonds invested in JPMorgan Chase (“Chase”) if the company does not do more to modify the mortgages of struggling homeowners.
The two unions combined have approximately $311 million invested in Chase, so the threat to pull the money out is not a hollow one. Legislation has been proposed in the recent past that would have allowed for modification of home mortgages in a Chapter 13 bankruptcy, but those bills were killed before their passage largely due to intense lobbying on the part of the mega-banks. Struggling homeowners do comprise a collective group, though they lack the necessary organization to promote their interests, especially when matched against the large and well funded lobbying groups for mortgage holders and realtors. The rather novel notion of the unions here is that the needed organization is already present and when that organization is combined with sincere market pressure, it may prove enough to get the necessary results.
Individual homeowners simply do not have the requisite power to force these mortgage holding behemoths to modify their mortgages. However, when individual homeowners are aligned in a collective group coupled with a market incentive for the mortgage holders to act, modification seems a much more attainable goal. Perhaps other unions with such pension investments will get on board for collective action. The “union collectives” may have the necessary size to make an impact through the market that government has proved unwilling or unable to achieve.