Over the course of the past 7 years powerful credit card companies and financial institutions have successfully lobbied Congress to make changes to current legislation. Congress had been close to passing a new bankruptcy law in each of the last two years, only to be held up by the controversial Schumer Amendment. The Schumer Amendment, sponsored by Senator Charles Schumer D-NY, would deny a discharge for government fines imposed on those arrested for abortion clinic violence.In late January 2004, the U.S. House of Representatives voted to combine a non-controversial Senate passed bill (S. 1920) providing bankruptcy protection to family farmers under Chapter 12 of the U.S. Bankruptcy Code, first with H.R. 975, the bankruptcy abuse reform bill that has passed in the House in 2003 without the Schumer amendment, and then in 2002 with the Schumer Amendment.Though the Schumer Amendment was also absent on the bankruptcy law, political pressure on Democrats to pass the bankruptcy law to assist farmers may have been too great.
On April 20th, 2005 the new bankruptcy reform act was signed into law by President Bush. This law went into effect on October 17th, 2005.The new bankruptcy law requires more from debtors, including pre-filing consultations with an approved consumer credit counseling service in an attempt to force consumers to pay their debts outside of bankruptcy. Additionally, in order to file bankruptcy, a debtor needs certification from that credit counseling agency.An income-based “means-test” determines which debtors may have the ability to pay back some of their debts. Those who do not pass the means test would be forced into a Chapter 13.In addition, the reform act requires the following: more documentation from the debtor, repeated filings will be discouraged, and the waiting period between Chapter 7 filings has been extended from 6 to 8 years.

Obviously this is only a short list of the changes. Give us a call at 303 893-0833 for your free consultation and an update on the latest changes in bankruptcy laws that could affect you.

1. Forbearance and Repayment is the most common way of resolving a loan default. This plan will let you repay part of the delinquency each month, along with your regular monthly installment. If you are temporarily unable to meet your monthly mortgage obligation, your holder may extend forbearance by agreeing to suspend payments for a limited period of time until you are able to begin a repayment schedule. Lenders will usually cooperate as long as you can show that you will be able to resume payments on a specific date in the near future.
2. Payment Assistance is also available through state and local governments. In addition, private charitable organizations have programs which will pay all or part of your mortgage obligation for a fixed period of time.
3. Re-amortization is an option for some. If your loan is re-amortized, the delinquency is added to the loan balance in order to bring your payments up to date. This increases your loan amount and will also increase your monthly payments. The amount of the payment increase will not be as great if the life of your loan is extended at the same time. Your loan holder is allowed to extend and/or re-amortize your loan.
4. Private Sale is an option if you do not believe you will be able to reinstate your loan and cure the default. A private sale of the property will enable you to meet your obligations and receive any equity you may have built up. Most private sales are for more than the amount owing on the loan.You may sell the property to a buyer who gets his or her own financing and pays off your loan, or to a buyer who will assume your responsibility for the loan. If the buyer is assuming your loan, you should contact your lender and obtain a release of liability before the sale is closed. If your property cannot be sold for an amount which is greater than or equal to what you owe on the loan you may pay a “compromise claim” for the difference in order to help you go through with the sale. You must contact your lender to discuss the situation and get prior approval for a sale with a compromise claim payment. You will be obligated to repay this unsecured debt to the Lender, but in most cases it is dischargeable in a bankruptcy filing.
5. Deed in Lieu of Foreclosure may be a better option if you will be unable to cure the default, and if a private sale does not appear realistic. Your Lender may consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and the Lender agrees to accept a deed, you will have to sign legal papers making the Lender the owner of the property. Normally, the Lender will have to pay your loan holder a claim for the difference between the value of the property and the amount you owe on the loan. If a deed is accepted, you may be released from all further liability, or you may be asked to agree to repay the the Lender for all or part of the claim that they pay.
6. Refunding is an option if you have a Federally Funded Loan, such as a VA loan. The governmental unit will buy a loan from the holder and take over the service. This is called “refunding”. Ask your lender to consider this alternative. If you have the ability to make mortgage payments, or will have the ability to in the future, but your loan holder has decided it cannot extend further forbearance or a repayment plan, you may qualify for refunding.
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In a Chapter 7 hearing, the trustee will ask you questions to verify your eligibility for Chapter 7 relief and to determine that you have fully disclosed all of your assets and liabilities.The bankruptcy trustee (not a judge) will conduct the hearing, but an attorney from our office will be sitting right beside you at all times. In Chapter 7 cases, your creditors usually do not appear.In Chapter 13 cases, sometimes creditors do appear, but any questions they ask are for informational purposes and are non-adversarial in nature.Some of the common questions are:

• Do you own a home?
• Have you transferred any property?
• Do you have the right to sue any one for bodily injury?
• Have you listed all of your debts and assets?
• Are you expecting to inherit money shortly?

The hearing only lasts about five minutes and is relatively informal. Most of our clients are relieved after they see how smoothly the hearing goes.

In a Chapter 13 case, the hearing lasts about 10 minutes. In addition to the questions asked in most Chapter 7 cases, the trustee will also ask questions to verify that you can afford your Chapter 13 payment, and that you are making your best efforts to repay your creditors through your Chapter 13 payment plan.

After a bankruptcy proceeding is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. At this point harassing phone calls should cease.

A case filed under Chapter 11 reorganization of the United States Bankruptcy Code is frequently referred to as a “reorganization” bankruptcy. While individuals are not precluded from using Chapter 11, it is more typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.Although the appointment of a case trustee is a rarity in a chapter 11 case, a party in interest or the United States trustee can request the appointment of a case trustee or examiner at any time prior to confirmation in a chapter 11 case.In a chapter 11 case, a liquidating plan is permissible. Such a plan often allows the debtor in possession to liquidate the business under more economically advantageous circumstances than a chapter 7 liquidation.
Confirmation of a plan discharges the debtor from any debt that arose before the date of confirmation. After the plan is confirmed, the debtor is required to make plan payments and is bound by the provisions of the plan or re-organization.The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt. The plan must be accepted by the creditors, bondholders, and stockholders, and confirmed by the court. However, even if creditors or stockholders vote to reject the plan, the court can disregard the vote and still confirm the plan if it finds that the plan treats creditors and stockholders fairly. Once the plan is confirmed, another more detailed report must be filed with the SEC on Form 8-K. This report must contain a summary of the plan, but sometimes a copy of the complete plan is attached.Committees of creditors and stockholders negotiate a plan with the company to relieve the company from repaying part of its debt so that the company can try to get back on its feet.One committee that must be formed is called the “official committee of unsecured creditors.” They represent all unsecured creditors, including bondholders. The “indenture trustee,” often a bank hired by the company when it originally issued a bond, may sit on the committee. An additional official committee may sometimes be appointed to represent stockholders.

The U.S. Trustee may also appoint another committee to represent a distinct class of creditors, such as secured creditors, employees or subordinated bondholders.
After the committees work with the company to develop a plan, the bankruptcy court must find that it legally complies with the Bankruptcy Code before the plan can be implemented. This process is known as plan confirmation and is usually completed in a few months.

There are two basic types of bankruptcy for individuals : Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.A filing under Chapter 7 Bankruptcy is often called liquidation or a straight bankruptcy. Liquidation converts one’s assets to money, if there are any. This process involves the appointment of a trustee. A trustee collects any non-exempt property, sells the assets and then distributes the proceeds from the sale to the appropriate creditors. However, unlike other bankruptcy filings, a debtor does not make payments to the trustee.Does this mean that you will lose your assets? NO! The answer depends on your particular situation, but in almost all bankruptcy cases you will get to keep your house and your car. The business’ or consumer’s nonexempt property is sold and the proceeds are to be used to pay off creditors. The State of Colorado provides a list of exemptions (property which is yours to keep).Under Chapter 7, a consumer or business asks the bankruptcy court to wipe out the debts that are owed, creating a fresh start. Filing for bankruptcy immediately puts into effect what is called an “automatic stay,” preventing creditors from contacting you to collect a debt or taking any action to collect any debt. This “stay” temporarily stops creditors from garnishing your wages, emptying your bank account or taking your home, vehicles and other property, or cutting off your utilities.Under a Chapter 7 Bankruptcy most (in most cases all) of your debts are then “discharged”. The word Discharge in bankruptcy is a good thing – it means your debts have been satisfied as per the Bankruptcy code. You are not obligated to pay them. Call us at 303-893-0833 for your free consultation.Chapter 7 may be right for you if:

• You are not declaring child support or alimony.
• You don’t have student loans to repay.
• You are not including fines and penalties imposed for violating the law.
• You do not have recent income tax debt or other income tax debt.
• Your income is less than the state median income.

Chapter 12 Bankruptcy of the Bankruptcy Code was enacted by Congress in 1986, specifically to meet the needs of financially distressed family farmers. The primary purpose of this legislation was to give family farmers facing bankruptcy a chance to reorganize their debts and keep their farms.The debtor must file a plan of repayment with the petition or within 90 days afterward, unless the court determines that the need for an extension is attributable to circumstances for which the debtor should not be held accountable.Upon successful completion of all payments under a chapter 12 plan, the debtor will receive a “discharge” which extinguishes the debtor’s obligation to pay any unsecured debts that were included in the plan, even though they may not have been paid in full.Under the Bankruptcy Code, those eligible to file as “family farmers” fall into two categories: (1) an individual or individual and spouse and (2) a corporation or partnership.Those falling into the first category must meet each of the following four criteria as of the date the petition is filed in order to qualify for relief under chapter 12:

1. The individual or husband and wife must be engaged in a farming operation.
2. The total debts (secured and unsecured) of that farming operation must not exceed $1.5 million.
3. Not less than 80% of the total debts which are fixed in amount must be related to the farming operation.
4. More than 50% of the gross income of the individual or the husband and wife for the receding tax year must have come from the farming operation.

Call us at 303-893-0833 for your free consultation.

A chapter 12 case begins with the filing of a petition and several additional forms, such as schedules of assets and liabilities, a statement of financial affairs, a schedule of current income and expenditures, and a schedule of executory contracts and unexpired leases.

Bankruptcy Rule 1007(b)(1):
The petition and other forms are filed with the bankruptcy court serving the area where the individual lives or where the corporation or partnership debtor has its principal place of business or principal assets. The exact filing requirements in each jurisdiction are specified in local rules of court.