Debtors Arrested for Ignoring Bankruptcy Court Orders, Spending Tax Refunds

Spending a tax refund that belongs to a bankruptcy estate or ignoring court orders may get you arrested by the U.S. Marshals Service and brought before the bankruptcy judge for contempt of court.

The moral of the story is don’t spend your tax refunds without talking to your bankruptcy lawyer first to make sure they are your refunds to spend.  Spending a refund that belongs to the bankruptcy estate can get you in a lot of hot water including denial of your discharge, judgment for the money and arrest if you ignore court orders to appear.

If you have made a mistake and spent refunds inappropriately, don’t ignore court orders.  Let you lawyer know so a plan can be made to make amends.  Getting arrested does not have to happen to you.

Judge Janice Miller Karlin of the U.S. Bankruptcy Court for the District of Kansas, Topeka Division, issued a new policy regarding bench warrants on January 26, 2009:

To assure the sanctity of this Court’s orders for turnover, appearance, etc., the Court will occasionally issue a Bench Warrant [Read more…]

What Else Must I Do to Complete My Case?

After your case is filed, you must complete an approved course in personal finances.  This course will take approximately two hours to complete.

Many of the course providers give you a choice to take the course in-person at a designated location, over the Internet (usually by watching a video), or over the telephone.

Your attorney can give you a list of organizations that provide approved courses, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust.

In a chapter 7 case, you should sign up for the course soon after your case is filed.  If you file a chapter 13 case, you should ask your attorney when you should take the course.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Will I Have to Go to Bankruptcy Court?

In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors” to meet with the bankruptcy trustee and any creditor who chooses to come.  Most of the time, this meeting will be a short and simple procedure where you are asked a few questions about your bankruptcy forms and your financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear at a hearing.  In a chapter 13 case, you may also have to appear at a hearing when the judge decides whether your plan should be approved.  If you need to go to court, you will receive notice of the court date and time from the court and/or from your attorney.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

Tax Refund in Bankruptcy

Cathy Moran on the Bankruptcy Soapbox reminds us of an important asset in bankruptcy:  tax refunds.

Your federal and state income tax refunds are property of the bankruptcy estate when you file bankruptcy in Kansas.  That is true for all refunds you are entitled to receive on the date your bankruptcy is filed, which includes the refunds for the year you filed that you will not receive until the following spring.

Example:  You file bankruptcy in January 2009.  The tax refunds for 2008 you will receive in 2009 belong to the bankruptcy trustee.  The trustee also will be entitled to a pro rata share of the 2009 refund you receive in 2010.

Kansas has no bankruptcy exemptions for tax refunds or earned income credits.  Some states do.

In chapter 13 bankruptcy, your tax refunds for years after you filed, we call post-petition years, are also property of the estate.

It is a federal crime to spend a tax refund that should be turned over to the bankruptcy trustee.  Your bankruptcy discharge can be denied.  It does not matter how much you need the money. The refunds will be sent to you and it is very tempting to keep the money.  Stop and call your lawyer to make sure you understand exactly what you are required to do with your tax refunds!

What Property Can I Keep?

In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors.

It is important to check the exemptions that are available in the state where you live.  (If you moved to your current state from a different state within two years before your bankruptcy filing, you may be required to use the exemptions from the state where you lived just before the two-year period.)

In some states, you are given a choice when you file bankruptcy between using either the state exemptions or using the federal bankruptcy exemptions.  If your state has “opted” out of the federal bankruptcy exemptions (Kansas has), you will be required to chose exemptions mostly under your state law.  However, even in an “opt-out” state, you may use a special federal bankruptcy exemption that protects retirement funds in pension plans and individual retirement accounts (IRAs). [Read more…]

Jane Bryant Quinn: Go Bankrupt in 2009

“The right time to go bankrupt is when you’re financially, stuck but still have assets to protect,” Newsweek financial columnist Jane Bryant Quinn tells her readers.  “If you are reaching the end of your rope, don’t try to hold on.  Save what you can.”

Saying she normally would tell readers to “suck it up, cut spending and repay your consumer debt,” this year she is risking her “good-girl reputation with a subversive idea:  go bankrupt in 2009”.  It is not always possible to pay debt “especially with an economic tsunami rolling over your home, job and health insurance.” [Read more…]

What Does It Cost to File for Bankruptcy?

It now costs $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple.  The court may allow you to pay this filing fee in installments if you can not pay it all at once.

If you hire an attorney you will also have to pay the attorney fees you agree to. [Read more…]

Kansas Bankruptcies Climb 8% in 2008

Bankruptcy filings increased eight percent in Kansas during 2008, a smaller increase than the 33% national increase seen in most of the country.  A total of 8712 cases were filed here, about 69% as chapter 7 cases for individuals or married couples.  Nationally, 1,064,927 consumer bankruptcy cases were filed in 2008.

Topeka saw slightly more chapter 13 cases than chapter 7 cases in 2008.  Chapter 13 is a reorganization plan for individuals. [Read more…]

Chapter 7 (Straight Bankruptcy)

In a bankruptcy case under chapter 7, you file a petition asking the court to discharge your debts.  The basic idea in a chapter 7 bankruptcy is to wipe out (discharge) your debts in exchange for your giving up property, except for “exempt” property which the law allows you to keep.  In most cases, all of your property will be exempt.  But property which is not exempt is sold, with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the mortgage or car loan payments, a chapter 7 case probably will not be the right choice for you.  That is because chapter 7 bankruptcy does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

If your income is above the median family income in your state, you may have to file a chapter 13 case [Read more…]

What Different Types of Bankruptcy Cases Should I Consider?

There are four types of bankruptcy cases provided under the law:

  • Chapter 7 is known as “straight” bankruptcy or “liquidation.”  It requires an individual to give up property which is not “exempt” under the law, so the property can be sold to pay creditors.  Generally, those who file chapter 7 keep all of their property except property which is very valuable or which is subject to a lien which they can not avoid or afford to pay.
  • Chapter 11, known as “reorganization,” is used by businesses and a few individuals whose debts are very large.
  • Chapter 12 is reserved for family farmers and fishermen.
  • Chapter 13 is a type of “reorganization” used by individuals to pay all or a portion of their debts over a period of years using their current income. [Read more…]