Saturday, December 24, 2011

Tennessee Legal Resources

       For those Tennesseans who are representing themselves in court the following site is a great legal resource:  This is a free site by Lexis Nexis that has up-to-date Tennessee Codes.  You can search the code by Table of Contents or by the actual language of the statute. 

       Another great site for you to use if you find yourself in court is   This site has all the current Tennessee rules of civil procedure.  Many times, Pro Se litigants (a person representing him/herself in court) lose on technicalities by not abiding by the rules of civil procedure, such as not filing a response by the deadline, or not answering requests for admissions.  When you receive a document from oppsosing party, it will say which rule its motion or discovery request is based on.  Use this website to read the rule so you can determine what you need to do to respond properly.  This website also contains rules of appellate procedure, criminal procedure, and the rules of evidence.  

       Please also notice the link on the left which says "Local Rules of Practice."  The previously mentioned rules apply state wide, however, local rules are just that: local.  Each court has their own rules that you need to know and that can vary from county to county and even judge to judge. 

       Whenever you find yourself in court, I highly recommend hiring an attorney since we are well versed in these rules, but if you are a DIY person or cannot afford an attorney these sites are wonderful resources.

Friday, December 16, 2011

Waiver of Bankruptcy Discharge is Unenforceable

       Recently I was talking to one of our client's creditors on the phone about our client's case. Our client had filed bankruptcy in Nashville. The creditor was trying to explain to me that their debt was not to be included in the bankruptcy because they have their borrower's check a box on the loan application that states that the borrower waives their right to include the debt in bankruptcy and that the debt would be non-dischargeable. I quickly reassured this creditor that such contract provisions are prohibited by the Bankruptcy Code and 6th Circuit case law.

       There are only two avenues which allow a debtor to waive a debt's discharge in bankruptcy. The first is through a reaffirmation agreement through §524. A reaffirmation agreement is a post-petition contract entered into by the debtor and creditor wherein a debtor will reaffirm the debt and waives its discharge in the bankruptcy. The reaffirmation agreement, however, is only valid after being approved by the bankruptcy court judge and meeting other strict conditions.

       The second way a debt passes through discharge is through §727(a)(10), which states that the court shall grant a discharge of the debtor's debts unless “the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter.” This waiver of discharge is unilateral and does not need to be agreed upon by the creditor, however, it still requires court approval.

        These two methods of waiving discharge have two things in common: (1) both require court approval and, (2) both must be entered into post-petition.

        The 6th Circuit Court of Appeals in 2005 interpreted these two provisions to conclude that any prepetition agreements which waive the discharge of a debt contradict the Bankruptcy code and are void because they offend the public policy of promoting a fresh start for individual debtors. Lichtenstein v. Barbanel, 161 Fed. Appx. 461 (6th Cir. 2005). Therefore, in order for any waiver of discharge to be valid it must be through either §524 or §727 and cannot be merely waived by the checking of a box on a loan agreement.  

       Please remember that a debtor who enters into a loan agreement with no intention of paying the money back, but to file bankruptcy instead, can be prosecuted for fraud.

       It must also be noted that a prepetition stipulation can waive the discharge of certain debts, but that is a totally different animal than contractual waiver agreements. For an in depth discussion of this topic please see Line Drawing and the Bankruptcy Discharge: Why Prepetition Stipulations Are Enforceable but Prepetition Waivers Are Not by Kristin Ballobin.

Tuesday, December 6, 2011

Bankruptcy Procedure: Conversion v. Dismissal

       A debtor in a Chapter 13 plan is allowed to dismiss her case at any time (Code §1307(b)) and allowed to convert her case to a Chapter 7 Bankruptcy at any time (Code §1307(a).  However, even though the Code states that one cannot be forced to remain in a Chapter 13 Bankruptcy and can either dismiss or convert the Chapter 13 Case, the procedure for each is quite different. 
      Rule 1017(f)(2) states that if a Debtor wishes to convert or dismiss her case under 1307(b) then it shall be by a motion governed by Rule 9013, which requires Notice, Motion, and a Hearing.  However, Rule 1017(f)(3) states that if a Debtor wishes to convert or dismiss her case under 1307(a), then all the Debtor has to do is file a notice of conversion; No motion, no hearing.  

       A closer look at this procedural process reveals an oddity in the requirements. The Bankruptcy Code specifically allows a debtor to voluntarily dismiss her case whenever she wants, and this right to dismiss is quite strong because the Code precludes any attempt to waive the right, yet the debtor must file a motion and have a hearing asking the Bankruptcy Court to dismiss the case; however, to convert the Chapter 13 case, the only requirement is Notice to the Court and parties, even though the right to convert is watered down.  For example, to convert a case to Chapter 7 from Chapter 13, the debtor must qualify to file Bankruptcy, must qualify for Chapter 7 under the Means Test, and must be in good faith (The Bankruptcy Code does not ask for good faith; this qualification was read into law by the Supreme Court 5-4 in Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007)).   Therefore it seems backwards that the unconditional right (dismissal) of the debtor requires more procedural process than the watered-down right (conversion) of the debtor.

Sunday, November 20, 2011

Tax Debt Relief: Offer in Compromise

      The Bankruptcy Code specifically states that tax debts are nondischargeable in a Bankruptcy. Therefore, filing a Chapter 7 bankruptcy will not help you with your taxes. The only way to get rid of your tax debt in a Bankruptcy is through a Chapter 13 plan. I do not know the policy of the IRS attorneys throughout the rest of the country, however, here in the Middle District of Tennessee, the IRS attorneys will object to the confirmation of a Debtor's plan unless the IRS claim is paid in full. Other unsecured creditors have no choice. If the debtor wants to pay 100% or 0% to the other unsecured creditors, they are forced to accept pennies on the dollar. The IRS, instead of accepting a percentage of the claim and going after the deficiency post-bankruptcy, will object and the case will be dismissed.

       There is, however, one way to reduce your tax debt. That is through an Offer in Compromise.  An Offer in Compromise is basically a debt negotiation with the IRS, where the taxpayer offers the IRS a settlement. There are 3 options: 1) a lump sum payment; 2) a reduced balance to be paid off in 5 months or less; or 3) a reduced balance to be paid off in over 5 months. When completing an Offer in Compromise you must also submit a budget and explanation of your circumstances.

       Additionally, once an Offer in Compromise has been accepted by the IRS, the taxpayer can then file for Chapter 13 bankruptcy and incorporate the Offer in Compromise into their plan. So long as the debt treatment remains the same, the IRS will not object.

       Forms necessary to complete an Offer in Compromise: F656F433a (Individual); F433b (Business)

Sunday, November 13, 2011

Credit Cards in Bankruptcy

      When discussing bankruptcy, many clients often ask about credit cards. Typically, when a debtor is ready to file bankruptcy, they are in such a financial bind that they are living off their credit cards. Credit card debt is dischargeable, but it may be subject to the 90 day rule. The 90 day rule is that it is best to wait 90 days from the last purchase made with a credit card in order to discharge that credit card debt. However, it is not always necessary to wait the 90 days. The Bankruptcy Code states in pertinent part:

Consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable (§523(a)(2)(C)(i)(I))

       What this means is that your credit card debt is not discharged in a Bankruptcy if (1) it is totaling more than $500, (2) to the same creditor, (3) for non necessary purchases (such as food, clothing, bills, etc.), and (4) made within 90 days prior to filing Bankruptcy.

       This protects creditors from debtors who run up credit card debt just before filing bankruptcy, unless that debt was used for food and other necessary essentials.

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Tuesday, November 8, 2011

The "Required" Real Estate Disclosure Statement Isn't Required

        If you are selling your home in Tennessee, you must comply with The Residential Property Disclosure Act (66-5-201 et seq), which applies to residential real property consisting of not less than one (1) nor more than four (4) dwelling units. This act specifies what types of disclosures a seller must make to a buyer as well as the rights, duties, and obligations of the real estate agents to the buyers. Moreover, this act delineates in what circumstances may a buyer bring a cause of action against either the seller or the agent. And those scenarios are extremely limited. This act gives sellers and agents a lot of protection. In fact, this act seems to give too much protection. Without going through all the causes of action, I want to point out a glaring loop-hole that can render the entire act superfluous and may allow a prudent seller, coupled with a dubious buyer, to make zero disclosures, though required by law.

       Section 202 of the act states in pertinent part, “the owner of the residential property shall furnish to a purchaser one of the following:” (1) A residential property disclosure statement regarding the condition of the property, including any material defects known to the owner; or (2) a residential property disclaimer statement stating that the purchaser will be receiving the property “as is.”

       By the language of the act, one would think that this Disclosure Statement is mandatory. Well, technically yes the Disclosure Statement is mandatory, just as the terms state the seller “shall furnish” a statement. However, this provision is unenforceable. Section 208(b) states, in pertinent part, “No cause of action may be instituted against an owner of residential real property subject to this part for the owner's failure to provide the disclosure or disclaimer statement required by this part.”

        Thus, a clever owner will not furnish a disclosure statement of his property to a buyer until compelled to by a buyer who actually knows his rights. Now, failure to provide such a statement upon request would allow the buyer not to go through with the sale; however, if after the purchase, the buyer finds defects in the property and wants to sue the seller, he would not be able to because of 208(b). Moreover, many Purchase Agreements contain a provision requiring the seller, under contract, to furnish the Disclosure Statement. But because of the doctrine of “merger” (article forthcoming discussing merger), after the real estate closing the buyer would not be able to sue the seller under a breach of contract theory. Accordingly, under the current Tennessee law, a buyer is without a post-purchase remedy if a seller never furnished a Disclosure Statement as required by law. Therefore, Caveat Emptor (“Buyer Beware”).

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Sunday, November 6, 2011

Differing Standards of Proof

       One interesting issue that can be found in the Tennessee Probate Court is the fact that two very similar cases have different standards of proof. The primary difference between these cases is that in one case the State of Tennessee is the Plaintiff, whereas in the other, a private party is the plaintiff. The areas of law involved here are Conservatorships (T.C.A. 34-3-101 et seq) and Adult Protection (T.C.A. 71-6-101 et seq). To summarize, a conservator is a person put in charge of another's (the conservatee) finances and even medical decisions if the conservatee is unable to take care of himself. This is different than a Power of Attorney, which is voluntary, where in a Conservatorship, the plaintiff brings an action nominating a Conservator to take care of the Respondent because the Plaintiff believes that the Respondent is unable to take care of himself.

       Now when a private party brings an action to appoint a Conservator for the Respondent the standard of proof for the Plaintiff is by “clear and convincing” evidence (see T.C.A. 34-1-126).  However, when the State of Tennessee, through the Department of Human Services, brings the similar action of Adult Protection, the standard to be used is by a “preponderance of the evidence” (see T.C.A. 71-6-124(5)(A),(B)).  An Adult Protection is where the Department of Human Services brings the action as the plaintiff believing that the Respondent is being abused, neglected (including self-neglect) or exploited because of any mental or physical disabilities.  

       Therefore, if you find yourself involved in either of these cases be sure that you recognize the difference because depending on which standard of proof is being used in your case can make the difference to whether an individual's right to make decisions on his own behalf is taken away or not.

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Monday, October 31, 2011

Prepetition Attorney Fees Collected Post Petition Violate Automatic Stay

       There is a common practice that has long taken place in the Chapter 7 bankruptcy realm which attorneys and debtors need to be aware of has some problems.  The practice is the acceptance of attorney fees after the debtor's bankruptcy petition has been filed and case commenced.  A majority of courts, including the 6th Circuit, have held that the requiring payment of attorney fees post petition is a violation of the automatic stay in section 362 of the Code.  Despite the 2009 Tennessee decision, I still see this practice continuing.  Maybe its because more young attorneys are entering the bankruptcy field and are unaware of this 2009 case, or local attorneys just did hear of it (The Nevin Law Firm is based in the Middle District of Tennessee in Nashville while the decision was in the Eastern District of Tennessee of Knoxville.)  No matter the reason, this practice openly continues despite the Bankruptcy Court's obvious using one law group as an example.

       The far reaching consequences of this decision, and the rich analysis of the Bankruptcy Code, make the case worthy of a law review article; however, tempted as I am to write a full-blown review of this decision, I will keep this article brief.

       The United States Bankruptcy Court of the Eastern District of Tennessee held that an agreement to pay attorney fees for the bankruptcy case, entered into prepetition, is a prepetition debt and is therefore dischargeable.  They also held that where an attorney makes the arrangement not to be paid in full upfront before filing the case creates a conflict of interest because the attorney then becomes a creditor of their own debtor-client once the case has been filed.  Moreover, any attempt to collect the unpaid balance from the debtor, the court held, would violate the automatic stay of section 362 and be cause for the debtor's own attorney to be issued sanctions by the court which would include a disgorgement of the fees already paid prepetition. 

       The court had multiple problems with the law group in this specific case including:  (1) the fact that the attorneys did not disclose to the client that such an agreement could at least potentially be dischargeable (since this was a case of first impression);  (2) the attorneys' disclosure to the court was that they had been paid in full prepetition, when in fact that was not true;  (3) after post-dated checks from the debtors had been returned, they made collection phone calls and sent collection letters. 

       However, the court did note that there are acceptable ways to receive proper compensation for attorney fees, for both post and prepetition payments.  The following are such options, which have been employed by other courts, and appear to fall within the scope of potential and allowable solutions: “(1) requiring Chapter 7 debtors to pay flat attorney’s fees in full prior to filing; (2) revising retainer agreements and expressly designating pre-petition services, which are paid pre-petition, and post-petition services, which shall be paid post-petition; or (3) accepting payment by third parties.”

       Therefore, if you are a debtor and your attorney is asking for post-petition payment, you might have found a way to have free legal service.  Attorneys! Make sure you get paid up front in full before filing the case! If, however, a debtor is in a bind and needs a case filed ASAP, then take either of the two following actions.  First either have a family member or friend of the debtor sign the fee agreement as a surety, since they would not fall under the protection of the Bankruptcy Code for your debtor's case.   

       Or, second, write two separate contracts.  The first contract should specifically delineate prepetition services, duties, and disclosures with fees scheduled next to each.  State specifically that any prepetition payments are for only the delineated services and that this contract does not bind the attorney to perform any post petition work on the case.  After filing the case, sign a second contract with the debtor which is for postpetition services.  Specifically delineate what those services are and how much you charge.  Also make full disclosure to the bankruptcy court of your fee arrangement on Form 7 Statement of Financial Affairs and the Compensation Statement of Attorney for Debtor. You must also disclose to your client the reason for the separate contracts, explaining to your client the automatic stay implications and the attorney fees. 

To read the case in full please see In re Waldo, 417 B.R. 854.

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Wednesday, October 26, 2011

Can Stockbrokers file for Bankruptcy?

            One issue in practicing bankruptcy that has come up time and time again is the rumor that stockbrokers are not allowed to file bankruptcy.  Most of the public, and many bankruptcy lawyers for that matter, are under the impression that the Bankruptcy Code precludes stockbrokers and commodity brokers from filing bankruptcy.  Well, like most rumors, this one is partially true. 

            To answer the question simply: stockbrokers and commodity brokers are allowed to file for bankruptcy under Chapter 7 of the code, but not under 11 or 13.  The relevant provisions belong in 11 U.S.C. 109, titled Who may be a Debtor.  Under section 109, subsection (b) deals with Chapter 7 filers, subsection (c) with Chapter 9 (municipalities), subsection (d) with Chapter 11, subsection (e) with chapter 13, and subsection (f) with farmers.  Thus the relevant subsections for our discussion are (b), (d), and (e).

             Subsection (b) is an expansive list that enumerates all those who may NOT file for bankruptcy under Chapter 7 of the code. Nowhere in this list are stockbrokers or commodity brokers mentioned.  Read for yourself:

(b) A person may be a debtor under chapter 7 of this title only if such person is not - (1) a railroad; (2) a domestic insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, a New Markets Venture Capital company as defined in section 351 of the Small Business Investment Act of 1958, a small business investment company licensed by the Small Business Administration under subsection (c) or (d) (!1) of section 301 of the Small Business Investment Act of 1958, credit union, or industrial bank or similar institution which is an insured bank as defined in section 3(h) of the Federal Deposit Insurance Act, except that an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 may be a debtor if a petition is filed at the direction of the Board of Governors of the Federal Reserve System; or (3) a foreign insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, or credit union, engaged in such business in the United States.

            Therefore, the fact that they are not included in the prohibitive section indicates the intent of the legislature to allow stockbrokers and commodity brokers to file for relief under Chapter 7.  But our analysis does not stop here.

            Next let's look at subsection (d), which deals with filing under Chapter 11.  Read the following section and notice the language dealing with stockbrokers and commodity brokers.

Only a railroad, a person that may be a debtor under chapter 7 of this title (except a stockbroker or a commodity broker), and an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 may be a debtor under chapter 11 of this title. (emphasis added)

            This section delineates who may file under Chapter 11, unlike Chapter 7, which lists who may not. This section allows railroads (who were excluded from protection of a Chapter 7 in subsection (b)) and all of those who are able to file under a Chapter 7 “except a stockbroker and a commodity broker.”  By implication, a stockbroker and a commodity broker must be able to file for protection under Chapter 7, otherwise that language is (1) superfluous and (2) inconsistent. 

             The drafters specifically excluded brokers from filing under Chapter 11.  They did so by allowing all those who qualify for  a Chapter 7 file a Chapter 11 with the exception of brokers.  Therefore, the writers are telling us that brokers do qualify for a 7 but are specifically exempted out of filing for an 11.  Furthermore, brokers are specifically precluded from filing an 11 in subsection (d), yet not specifically excluded in subsection (b).  This word choice demonstrates that in order to remain consistent with delineations and exclusions, and with the implication of the specific exclusion from qualifying 7 debtors, brokers are allowed to file bankruptcy under Chapter 7, but not Chapter 11.

            Finally is subsection (e), which deals with those allowed to file bankruptcy under Chapter 13.  This section reads as follows:

(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $250,000 and noncontingent, liquidated, secured debts of less than $750,000, or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $250,000 and noncontingent, liquidated, secured debts of less than $750,000 may be a debtor under chapter 13 of this title.  (emphasis added)

Subsection (e) makes it easy.  The Code here specifically says that a stockbroker and a commodity broker are not allowed to file a Chapter 13 bankruptcy case. No “ifs,” “ands,” or “buts” about it.

             To remain consistent with the rest of the language used in the other subsections a broker must be allowed to file for bankruptcy under Chapter 7.  Subsections (d) and (e) specifically exclude brokers from their filing bankruptcy under those respective chapters, while the one section, subsection (b), that delineates specifically who may note file under its respective chapter does not list brokers.  Therefore, the exclusion of brokers in subsection (b), coupled with the specific exclusions in (d) and (e), along with the implication created in (d)'s language of allowing all qualifying 7 filers, except brokers, to file an 11, lead to the conclusion that a stockbroker and a commodity broker are allowed to filed for bankruptcy under Chapter 7 of the Code, but not 11 or 13. 

Thursday, September 29, 2011

How to Prove the Validity of a Will

The process of "proving" or showing the validity of someone's will involves multiple considerations beyond just the will's existence. In some cases, where there is ample evidence that the will isn't consistent with the decedent's intentions, the will may be thrown out entirely.

While the loss of a loved one is a trying time for any family, sometimes situations arise wherein the contents of a loved one's will become the source of controversy. Perhaps you've found a will that no one in the family knew existed, or one that was written in the last few weeks before your loved one's death. Maybe the contents of the will are not exactly what the family might have expected. How will the court determine whether or not that will is valid? 

Mental Capacity

When determining whether a will is valid, one of the most important considerations is the decedent's mental capacity at the time the will was written. For a will to be considered valid, the individual who wrote it must have been of sound mind at the time it was drafted. If you believe that your loved one was not "himself" when he wrote his will, as in the case of dementia or Alzheimer's disease, you may be in a position to contest his will. You will need to show proof of your loved one's mental capacity (as in the form of a letter from his doctor). Undiagnosed conditions and anecdotal evidence will be more difficult for the court to accept.

Undue Influence

While more difficult to prove than straightforward mental capacity concerns, undue influence is another valid reason to contest a will. Sometimes, wills are contested because it's believed that someone unduly influenced the decedent to write his will in a certain way. This situation is less common than mental capacity cases, but can sometimes go hand in hand with a mental capacity issue. A close friend or family member may be suspected of taking advantage of the decedent's diminished mental capacity in order to pressure him to distribute his assets in a certain way.

Proper Execution

The act of putting one's final wishes on paper, as in a handwritten will that's kept at home, for example, doesn't ensure that those wishes will be followed after one's death. There is a process that must be followed in order to properly execute a will. This is part of the problem with DIY wills and downloadable templates. While the contents may be fine, if the will isn't properly executed – including all required signatures and notarization – there is a good chance that the court won't honor it.

Will Contests

Will contests are not only emotionally difficult for everyone involved, they can also be quite complex. If you truly believe that the contents of your loved one's will are not consistent with his intentions, you will need to hire a probate attorney to help you file a contest. In most states, there is a time limit, so you'll want to take action quickly. You will also want to find an attorney with both the skill and experience to handle your case.

This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.

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Thursday, September 22, 2011

What is Involved in the Probate Process

The death of a spouse, parent or other loved one is a difficult time that involves heightened emotions, complicated paperwork, and a seemingly endless task list. If you've been named as a loved one's executor, then it is wise to hire a probate attorney. Probate is the legal process that takes place after someone dies. It involves determining whether that person had a will, "proving" the will, securing and listing the person's assets, and then settling the person's outstanding financial affairs.

Identifying the Executor

The first step in the probate process is identifying someone to act as the decedent's personal representative. This will be the person responsible for "administering the estate," or handling the affairs of the estate, for the duration of the probate process. If the decedent had a will, he probably named an executor. Unless there is a compelling reason not to, the court will, in most cases, honor the decedent's wishes by allowing the executor to act as his personal representative. If there was not a will, the court is likely to select the deceased individual's spouse, adult child or close family member to act as his personal representative. In the event that no family can be identified, the court may give this responsibility to a bank, trust company or attorney.

Determining the Assets

You are going to have a lot of work ahead of you if you've been named as a loved one's executor. First, you will need to gather and inventory all of the decedent's assets, including bank and brokerage accounts, real estate, and personal property, and determine its value (which sometimes requires an appraisal). You'll also need to file for any life insurance benefits the decedent may have been entitled to and check with his employer to secure any unpaid salary or pension.

Settling the Debts

Once the assets have been gathered and their values determined, you'll begin the process of settling your loved one's outstanding debts. This involves notifying any known creditors of his death and, in most states, placing a notice in the local newspaper to inform any unknown creditors of his death. Creditors may then begin to file claims against the estate. As the executor, your role is to review these claims, determine their validity (or file an exception), and, assuming that assets are available, make payments to cover them.

You will also need to ensure that the estate does not incur any additional costs by closing out all of your loved one's accounts, including credit cards, bank accounts and any subscription services. When all debts have been settled, you'll be responsible for distributing the remaining assets according to your loved one's will or, if he didn't have a will, according to your state's laws of descent and distribution.

Hiring a Probate Attorney

Losing a loved one is one of the hardest things you'll ever have to go through. Spending countless hours handling the affairs of his estate can make the mourning process even longer and more difficult. Therefore, it is a good idea to hire a probate attorney. Like most legal processes, probate is not a simple matter. It involves complex paperwork, deadlines, and serious consequences for missteps.

In fact, there is quite a lot of paperwork to keep track of. When you're already going through a difficult, emotional time, it's easy to become overwhelmed. If you hire a probate attorney, then your attorney will act as an advisor, guiding you through each step of the probate process to ensure that you are 1) aware of your responsibilities and 2) completing all paperwork properly and 3) according to deadlines.

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Monday, September 12, 2011

Filing for Chapter 7 Bankruptcy

When it comes to the concept of bankruptcy, most people associate it with having their debts permanently relieved. In reality, there is more than one type of bankruptcy. In a Chapter 13 bankruptcy, the debtor keeps his assets but agrees to a payment plan to eliminate his debt within a few years. When faced with a major financial setback, however, such as a job loss or costly illness, many people choose to file for a Chapter 7 bankruptcy.

Discharge of Most Debts

Also called a "straight" bankruptcy, a Chapter 7 bankruptcy will result in a discharge of most debts. When debts are discharged, you are no longer legally required to pay them and creditors are prohibited from taking any kind of collection action against you. Chapter 7 can eliminate credit card debt, medical bills, payday loans, judgments against you, deficiency debts, or repossessed motor vehicles. A Chapter 7 bankruptcy does not, however, relieve you from child support responsibility, taxes or student loans.

Because bankruptcy is a federal law, filing for Chapter 7 bankruptcy in Tennessee is not much different than filing for bankruptcy in any other state. However, state law does play an important role in one area. The state in which you file for bankruptcy will determine the amount of money and assets you will be left with after your bankruptcy filing is complete.

Exemptions for Personal Property and Real Property
A portion of your assets will be exempt from your creditors when you file for bankruptcy. The exemption amounts in a bankruptcy filing are the amounts of money and assets you will have that are exempt from creditors. These assets and money are intended to help you get a fresh start after your bankruptcy.

There are separate exemptions for personal property and real property. Your personal property includes money you have in a bank, your household goods, any equity you may have in an automobile, or anything else of value that you own. When you file for bankruptcy, the amount of personal property you will be allowed to keep is determined by your state's personal property exemption limits. In Tennessee, the personal property exemption for a single filer is $10,000. For a married couple, the personal property exemption is $20,000. The exempt amounts are for the equity in personal property after deducting any amount of debt on the property such as an automobile.

The real property exemption amounts in Tennessee are $5,000 for an individual and $7,500 for a married couple. Some exceptions to this rule allow for greater exemptions for those people over 62 and for single parents. The real property exemption (or homestead exemption) is intended to allow you to stay in your home after your bankruptcy. This exemption, however, only applies to your primary residence. So, if you're filing for Chapter 7 and happen to own more than one home, you will only be allowed to keep the home in which you live most of the time.

Remember, before filing for bankruptcy in Tennessee, it's essential that you contact an experienced attorney to help you determine whether Chapter 7 bankruptcy is the best course of action for you.

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Friday, September 9, 2011

Bankruptcy Does Not Mean You Don't Have Any Money

When it comes to bankruptcy, many people associate it with a total lack of money. However, contrary to popular belief, filing for bankruptcy does not necessarily mean that you don't have any money. Bankruptcy isn't associated with a complete lack of assets; it's associated with insolvency, which is an inability to meet your financial obligations.

Two Scenarios

Basically, two scenarios define bankruptcy according to the law. One is the scenario in which someone's liabilities exceed his assets. The other is one in which someone is simply unable to pay his debts. If either scenario applies to you, you could qualify to file for bankruptcy.

Bankruptcy itself either relieves you of your debt (as in a Chapter 7 Bankruptcy), or allows you to deal with your debt in a different way (as in a Chapter 13 bankruptcy). Whether you qualify for Chapter 7 or Chapter 13 bankruptcy will depend on the amount of your debt, your income (if any), and your potential ability to repay your debts. In neither case will you be completely without money or assets unless, of course, you had no money or assets to begin with.

Filing for Chapter 7 Bankruptcy

When filing for Chapter 7, you will be asking for a portion of your debt to be discharged completely. In exchange, you agree to give up most of the money and assets you have at your disposal. Any assets will likely be sold, and the proceeds distributed to your creditors as partial repayment. You do, however, get to keep a small amount of personal property and possibly your home, which are called "exemptions."

The amount of personal and real property you are allowed to keep depends on the state in which you live. While some states allow large exemptions, others only allow a few thousand dollars. Because the rules vary so widely from state to state, many people who file for bankruptcy choose to do so in a state that has relatively high exemption amounts.

Most Chapter 7 cases are "no asset" cases. That is, usually no assets are available above the debtor's exemption amounts. In the few cases where some nonexempt assets are left, those assets will be distributed according to the priorities defined by the Bankruptcy Code. Domestic support and back taxes are paid first, then credit cards, medical bills and other debts. Most creditors will not receive 100% of what they're owed. Instead, they will receive only a portion of that amount. The exact distribution will be determined by the court.

Filing for Chapter 13 Bankruptcy
When filing for a Chapter 13, your money and your assets remain largely under your own control. In fact, you can only qualify for Chapter 13 bankruptcy if you have a steady income. A Chapter 13 can result in a discharge of some debts that are not fully paid in the repayment plan. The payment plan is designed to repay your creditors within a specified time frame, up to five years. This is accomplished by consolidating your debts and allowing you to make a single monthly payment.

Sometimes, the payment will come in the form of a payroll deduction. The amount of the payroll deduction will be determined based on your income and the state in which you live. In exchange for being allowed to retain control of your property, you are required to repay your creditors at least as much as the total value of all of your nonexempt personal property.

If you're considering filing for bankruptcy, an attorney can help you better understand what your financial picture will look like after your bankruptcy. While you certainly won't be wealthy after a bankruptcy, in most cases, you won't be completely broke either. Understanding your obligations under each type of bankruptcy and your state's exemption amounts can help you decide whether bankruptcy is the right choice for you.

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Thursday, September 8, 2011

Legal Options of Debt Relief

Debt relief is anything that can help someone cope better with a bad financial situation. With the economy still on shaky ground and unemployment in some states at all-time highs, many people are finding themselves faced with sky-high debt and piles of bills. When it comes to debt relief, it can come in several forms. Most commonly, however, the term "debt relief" refers to either a Chapter 7 or a Chapter 13 bankruptcy.

Chapter 7 Bankruptcy
Chapter 7 bankruptcy is what many people call a "straight" bankruptcy. In a Chapter 7 Bankruptcy, most of your debts are discharged. For individuals who are struggling with late credit card payments, medical bills or impending foreclosure, this means relief from threatening phone calls, harassing letters and the fear of losing their home. While a Chapter 7 bankruptcy may not leave you completely without debt (you are still responsible for domestic support obligations, taxes and student loans), it does end the stress and anxiety that accompanies seemingly insurmountable debt.

Chapter 7 is not without disadvantages, though. When you file for Chapter 7 bankruptcy, the bankruptcy trustee can sell any of your nonexempt assets in order to help satisfy your creditors. In extreme cases, however, when an individual is faced with a large amount of debt and no means to repay it within a reasonable timeframe, Chapter 7 bankruptcy may be the only option that makes sense.

Chapter 13 Bankruptcy

On the other hand, debt relief comes in a slightly different form in a Chapter 13 bankruptcy. Chapter 13 is most appropriate for someone who is earning an income but, for some reason, has amassed a large amount of personal debt and has fallen behind on payments. When you file for a Chapter 13 bankruptcy, your debt is consolidated and you're given a payment plan.

Your Chapter 13 payment plan is advantageous for a number of reasons. First, the plan makes your debt more affordable on a month to month basis. Because your debt is consolidated, you're no longer responsible for paying several bills each month. Instead, you will make a single payment, the amount of which will be determined by your income and necessary living expenses. Second, your payment plan spreads your debt out over a longer period of time, usually from three to five years. This lowers your monthly obligation substantially and allows you to keep more of your income. Having more income to pay for your living expenses helps prevent you from incurring additional debt while you're paying off your existing creditors, thereby "stopping the cycle" so you can get back on your feet.

Chapter 13 bankruptcy provides relief by allowing you to pay off your debts and improve your credit. It simply changes your situation from one in which you can't meet your monthly obligations into one in which you can. This also means that the whole of your debt will be paid from your income, not from the sale of any of your assets. Chapter 13 also allows you to keep real property, even if it is not your primary residence, so long as you continue to meet your obligations under your Chapter13 payment plan.

Before deciding to file for bankruptcy, it is always advisable to speak with an attorney to determine which debt relief option may be available to you. In some cases, you can even achieve debt relief without filing for bankruptcy at all. By re-negotiating your agreements with creditors or working out a mutually agreeable discounted payment schedule, an attorney may be able to help you through a difficult financial time while minimizing the impact on your future credit.

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Tuesday, September 6, 2011

Consulting an Attorney about Your Debt Early

When it comes to mounting debts, early intervention makes for a better overall solution. For this reason, The Nevin Law Firm in Nashville, Tennessee, recommends you consult with an attorney as soon as you realize that your debt is becoming a problem.

Dealing with excessive amounts of debt can be both financially and emotionally devastating. Harassing calls and letters from creditors, threatened foreclosure or repossession, and the loss of your good credit are enough to make you feel as though there's no way out. Fortunately, help is available for families who are struggling with debt.

However, most people who consult attorneys for help with their debt wait too long to do so. Often they allow themselves to fall so behind on payments that catching up doesn't seem like an option anymore. While debt relief is certainly possible at this late stage, addressing financial problems earlier allows us to minimize the potential for major consequences and to put a plan in place to get out from underneath oppressive debt in the most expeditious way possible.

Why to Ask an Attorney for Help
Rather than waiting until you've fallen behind on payments, it's important to seek help as soon as it becomes clear that falling behind is likely to happen. For example, if you're living paycheck to paycheck and are barely able to pay your bills each month, losing your job will likely be the straw that breaks the camel's back. By consulting with an attorney as soon as you've lost your job, you may be able to avoid falling into a particularly dire situation.

Likewise, if you don't have health insurance, a major illness or injury can create a serious debt problem quickly. All too frequently, medical bills, minimal savings and an inability to work are a recipe for financial ruin. An attorney may be able to help you find a way to deal with your mounting medical bills without jeopardizing your credit.

How Your Attorney Will Help You
Once you can see that you're going to have difficulty making payments on time, you should consider seeking legal advice. An attorney can help you find relief from oppressive debt in a number of ways.

Renegotiation: First, after talking with you about your financial situation, your attorney will help you determine the best course of action, represent you in hearings, and work with your creditors to re-negotiate your interest rates and payment terms. This will make it easier for you to meet your financial obligations on a month-to-month basis and to keep your credit intact.

Chapter 13 Bankruptcy: If negotiating with your creditors is not an option and you have a steady income, your attorney may advise you to file for Chapter 13 bankruptcy. Chapter 13 bankruptcy allows you to repay your debts in a way that will be more manageable for you and helps you to restore your credit. When you file for Chapter 13, your debts are consolidated into a single monthly payment, the amount of which is determined by your income and amount of debt. Chapter 13 bankruptcy not only lowers your monthly financial obligation, it also stops creditor actions against you and allows you up to five years to repay your debts.

Chapter 7 Bankruptcy: When all other options have been exhausted or if you don't have a steady source of income, your attorney may advise you to file for Chapter 7 bankruptcy. Chapter 7 bankruptcy provides you with permanent relief from the majority of your debts and stops creditor actions against you. In a Chapter 7 bankruptcy, your debts are discharged and your assets, with a few exceptions, are distributed among your creditors. You are allowed to retain certain exempt assets. Your attorney will help you understand which assets you'll be allowed to keep after filing for Chapter 7 bankruptcy.

Mounting bills and pressure from creditors can make anyone feel uneasy. Whether or not you ultimately choose to file for bankruptcy, getting an attorney involved as early as possible when debt becomes a problem offers you the best chance at a positive outcome. Remember, meeting with an attorney is the first step toward finding relief from debt and getting back on the right financial path.

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