Employment Discrimination and Bankruptcy

A common question I receive is whether an employer can deny you a job or discriminate against you because of filing bankruptcy.  Bankruptcy Code Section 525(a) provides that a governmental unit "may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discrimate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act."  http://codes.lp.findlaw.com/uscode/11/5/II/525 

The above section protects an individual's rights if they are denied or terminated from employment by the government on the basis of having filed a bankruptcy case.  An individual cannot be discriminated against solely on the basis of being bankrupt even before their case is filed.  A job application also cannot be denied solely on the basis of an individual having filed for bankruptcy.

Bankruptcy Code Section 525(b) provides that "no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt-(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act."  http://codes.lp.findlaw.com/uscode/11/5/II/525 

The above section prevents a private employer from denying a job application or terminating you solely because of filing bankruptcy.  Even if your spouse or family member has filed bankruptcy then the employer cannot terminate you on the basis of your association with a bankruptcy filer.

An individual is eligible for employment discrimination protection if they have filed for bankruptcy, become insolvent (broke) even before filing for bankruptcy, or if they did not pay a dischargeable debt.  The Section 525 protection against discrimination helps to ensure that individuals going through the bankruptcy process are able to retain their jobs to avoid incurring further debts.

In order to take advantage of the protection against discriminatory treatment you must have evidence against your employer.  The debtor must prove that their bankruptcy status is the only reason for termination or for the employer denying a job application.  The debtor must show that they were terminated or denied employment based soley on a bankrupty filing, insolvency, or failure to pay a debt.  Victims of unlawful bankruptcy discrimination may be entitled to compensation for it and possibly for emotional distress.  If you believe you are being discriminated against due to bankruptcy status it is imperative to maintain a record of your performance that could help disprove other potential reasons for termination.

For more information about bankruptcy in Kansas City, please visit The Smalley Law Firm's website at http://www.thesmalleylawfirm.com

Leases and Bankruptcy

Renters often inquire about what will happen to their residential (apartment) lease when they file bankruptcy.  The bankruptcy code imposes an "automatic stay" on all collection and enforcement proceedings upon filing of the bankruptcy petition.  This stay prevents eviction proceedings or other actions for possession or monetary damages without the bankruptcy court's permission as long as the debtor/tenant continues to timely perform all obligations of the lease (such as continuing to pay your rent on time).

Under Chapter 7 the trustee has 60 days after the debtor files bankruptcy to reject or accept the lease.  Generally, the trustee will not accept, or reaffirm, the lease because most leases have no value to the trustee.  The only exception would be a lease with a below market lease payment where the trustee believes someone may pay for the assignment of the lease.  For example, if your rent is $500 a month but the trustee believes that he or she could lease the apartment for a significantly higher monthly amount, then the trustee may accept your lease.

If the the trustee does not accept the lease then the debtor/renter can either reject (terminate) or assume (continue) unexpired leases.  The lease can only be assumed if the debtor cures any defaults (such as a past due amount owed to the landlord).  If the debtor rejects the lease, the entire lease obligation is treated as a pre-petition dischargeable debt and the landlord can evict the debtor any time as the lease is no longer in effect.  However, the landlord may still accept the debtor's monthly rent payments and the debtor's occupancy.

Section 362(b)(22) of the Bankruptcy Code provides that the automatic stay automatically ceases 30 days after filing bankruptcy.  Then the landlord is permitted to continue any eviction, unlawful detainer or similar proceeding against the debtor/tenant where the landlord obtained a judgment for possession against the debtor/tenant prior to the bankruptcy filing.  However, the debtor/tenant can challenge the end of the automatic stay pursuant Section 362(b)(22) under certain specific circumstances.  Additionally, even if the debtor is evicted after the stay is lifted, the debtor will have no further personal liability for any rent payments not made.  For additional information please contact The Smalley Law Firm at (913) 601-3549 for a free initial consulation or visit our website at http://www.thesmalleylawfirm.com

Will Bankruptcy Stop Wage Garnishment?

A common question I receive is whether filing bankruptcy will stop a creditor from garnishing wages.  The short answer is "yes".  The "automatic stay" that applies when bankruptcy is filed "stays"  or prevents all collection activities.  Therefore, during bankruptcy creditors cannot contact you about the debt, cannot file a lawsuit against you on the debt and cannot attempt to collect on the debt.

Wage garnishment is considered a "collection" under the bankruptcy code.  As a result, a creditor cannot start a garnishment or continue to try to attempt to garnish your wages without violating the "automatic stay" of all collection activities under the bankruptcy code.  If your wages have been garnished or you believe that your wages are going to be garnished you should consider speaking to an experienced Kansas City bankruptcy attorney, such as myself, Cary S. Smalley of The Smalley Law Firm, about your legal rights.  For more information please visit http://www.thesmalleylawfirm.com

Second Mortgages and Bankruptcy

With the real estate market decline in recent years and resulting depreciation in home values, many people have been inquiring about what happens to a second mortgage on your home if you file for Chapter 7 or Chapter 13 bankruptcy.  Many people now have second mortgages that are no longer secured by their home's value.  For instance, if your home is now worth $300,000 and you owe $300,000 on a first mortgage and $50,000 on a second mortgage, the value of your home will secure your first mortgage but there is not enough equity in your home to secure any of the amount owed on the second mortgage.

If you file for Chapter 7 bankruptcy in Kansas City, the bankruptcy discharge will eliminate your personal liability and any lien on the first mortgage if you are surrenduring your home.  However, on the second mortgage the bankrupty discharge will only eliminate your personal liability, and not the lien.

If you file for Chapter 13 bankruptcy in Kansas City you can eliminate your personal liability and the lien on a second mortgage under a procedure called "lien stripping".  "Lien stripping" allows you to eliminate a lien that has no security in the home.  However, the lien cannot be eliminated if it is at least partially secured by a portion of your home's current value.  So, if your home is worth $300,000 and you owe $275,000 on a first mortgage and $50,000 on a second mortgage you cannot "strip" the second lien because it is secured in part by a portion of your home's value.

Even if you cannot "strip" a lien, it will still likely have very little effect on your financial future.  Due to the Chapter 7 discharge of your personal liability for the second mortgage you cannot be sued for any money owed on it.  Additionally, without value in the home securing the second mortgage, the second mortgage holder would not benefit from a foreclosure since all of the value of the home would go to the first mortgage holder in a foreclosure sale.  Therefore, it is unlikely there will be any negative consequences from the second mortgage lien remaining on your home after bankruptcy unless the home's value rises enought to allow you to sell the home or to support foreclosure by the second mortgage holder.

In summary, a Chapter 13 bankruptcy will allow you to "lien strip" but Chapter 7 may suit the debtor just as well if they are severly underwater in the second mortgage (meaning they owe more on the first mortgage than the home is worth).  For more information please see the attached article on bankrate.com  http://www.bankrate.com/finance/mortgages/bankruptcy-may-end-second-mortgage-woes.aspx.  As always, also please feel free to check out my website for additional bankruptcy information  http://www.thesmalleylawfirm.com

Emergency Bankruptcies for Repossession or Foreclosure

Many people are faced with an imminent threat of a car repossession or home foreclosure before seriously considering bankruptcy.  Filing a typical Chapter 7 or Chapter 13 bankruptcy in Kansas City often requires working with your attorney to prepare over 50 pages of paperwork for filing.  It often can take quite a bit of work and time for the filer to compile the required information and documents and provide it to their attorney and it then requires additional time and work by the attorney to organize this information and prepare the proper paperwork.

So what happens if you are faced with immediate repossession or foreclosure and need the protection of bankruptcy to prevent repossession or foreclosure?  In such a case the Bankruptcy Code allows you to file an "emergency" skeletal Petition consisting of only the first two pages of the Petition along with your credit counseling certificate.  You will then have 15 days to file the remainder of the paperwork with the Court.  Filing the "emergency" petition can prevent immediate foreclosure, repossesion or wage garnishment, along with creditor harassment.

However, I do not ever recommend or would I agree to file an "emergency" Petition without proof of an imminent (within the next few days) foreclosure or repossesion because if the remainder of the paperwork is not filed within the next 15 days the Court will dismiss the bankruptcy case.  Therefore, save for the case of a true "emergency", a client should always be prepared to compile all required information and documentation prior to filing the bankruptcy Petition.  Please be aware that it can often take at least a week to provide the required information and documentation.  For more information about bankruptcy in Kansas City please visit my firm's website at http://www.thesmalleylawfirm.com

Credit Counseling and Debtor Education

Many people are not aware that prior to filing bankruptcy in Kansas City you are required to complete a credit counseling course.  Additionally, after filing, but prior to discharge, you are required to complete a debtor education class.  Both of these classes can be completed online, over the phone or even in person.

The credit counseling class generally costs $25 to $35 online and lasts 60 to 90 minutes.  The debtor education class generally costs $15 to $25 online and lasts about two hours.  Generally, the classes are more expensive if you choose to do them via telephone or in person. 

Before signing up for a class be sure to make sure that the agency is approved by the U.S. Trustee's office for the judicial district (court) you plan to file your case in.  Here is a link to the U.S. Trustee's office for the pre-filing credit counseling course:  http://www.justice.gov/ust/eo/bapcpa/ccde/cc_approved.htm and here is a link to the U.S. Trustee's office for the post-filing debtor education class:  http://www.justice.gov/ust/eo/bapcpa/ccde/de_approved.htm  Once you click on the link just select your judicial district (for example "Kansas" or "Western Missouri") and click "go".  You will then be provided with an up-to-date list of approved counseling agencies for your judicial district.

As always, feel free to check out my website at http://www.thesmalleylawfirm.com for more information on bankruptcy in Kansas City.  You can also contact me, Kansas City bankruptcy attorney Cary Smalley, at (913) 601-3549.  Have a great week!

Bankruptcy Filing Fees Increased As Of November 1, 2011

As of November 1, 2011 all bankruptcy court filing fees increased.  The fee to file a Chapter 7 bankruptcy in Kansas City is now $306 and the fee to file a Chapter 13 is now $281.  For businesses, the filing fee for a Chapter 11 is now $1046.  Check out this link http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyResources/BankruptcyFilingFees.aspx for a list of updated filing fees for all Chapters.

Please visit my website at http://www.thesmalleylawfirm.com or contact me, Kansas City bankruptcy lawyer Cary Smalley, at (913) 601-3549 for more information.

What to Expect at the 341 Meeting of Creditors

Many people who are filing for bankruptcy ask me what kind of questions that they can expect at the 341(a) Meeting, also known as the Meeting of Creditors.  Here is the list of questions your trustee is required to ask you and a list of sample questions your trustee may ask you, depending on the facts of your case. The hearing isn't a test or interrogation, it is a fact finding meeting.  If you have any questions about answering any of these questions, you should discuss them with your Kansas City bankruptcy attorney prior to your 341 hearing.  For additional information, here is a great resource:  http://www.bankruptcylawnetwork.com/

QUESTIONS THE TRUSTEE IS REQUIRED TO ASK YOU AT YOUR BANKRUPTCY HEARING (341(a) MEETING OF CREDITORS)

1. State your name and current address for the record.

2. Please provide your picture ID and Social Security number card for review.

3. Did you sign the petition, schedules, statements, and related documents and is the signature your own? Did you read the petition, schedules, statements, and related documents before you signed them?

4. Are you personally familiar with the information contained in the petition, schedules, statements and related documents? To the best of your knowledge, is the information contained in the petition, schedules, statements, and related documents true and correct? Are there any errors or omissions to bring to my attention at this time?

5. Are all of your assets identified on the schedules? Have you listed all of your creditors on the schedules?

6. Have you previously filed bankruptcy? (provide trustee with case number and the discharge information to determine discharge eligibility in this case)

7. What is the address of your current employer?

8. Is the copy of the tax return you provided a true copy of the most recent tax return you filed?

9. Do you have a domestic support obligation? To whom? Please provide the claimant’s address and telephone number, but do not state it on the record. Are you current on your post-petition domestic support obligations?

10. Have you filed all required tax returns for the past four years?

SAMPLE QUESTIONS THE TRUSTEE MAY ASK YOU

1. Do you own or have any interest whatsoever in any real estate? If owned: When did you purchase the property? How much did the property cost? What are the mortgages encumbering it? What do you estimate the present value ofthe property to be? Is that the whole value or your share? How did you arrive at that value? If renting: Have you ever owned the property in which you live and/or is its owner in any way related to you?

2. Have you made any transfers of any property or given any property away within the last one year period (or such longer period as applicable under state law)? If yes: What did you transfer? To whom was it transferred? What did you receive in exchange? What did you do with the funds?

3. Does anyone hold property belonging to you? If yes: Who holds the property and what is it? What is its value?

4. Do you have a claim against anyone or any business? If there are large medical debts, are the medical bills from injury? Are you the plaintiff in any lawsuit? What is the status of each case and who is representing you?

5. Are you entitled to life insurance proceeds or an inheritance as a result of someone’s death? If yes: PIease explain the detaiI s. If you become a beneficiary of any one’s estate within six months of the date your bankruptcy petition was filed, the trustee must be advised within ten days through your counsel of the nature and extent of the property you will receive. FRBP 1007(h)

6. Does anyone owe you money? If yes: Is the money collectible? Why haven’t you collected it? Who owes the money and where are they?

7. Have you made any large payments, over $600, to anyone in the past year?

8. Were federal income tax returns filed on a timely basis? When was the last return filed? Do you have copies ofthe federal income tax returns? At the time of the filing of your petition, were you entitled to a tax refund from the federal or state government ? If yes: Inquire as to amounts.

9. Do you have a bank account, either checking or savings? If yes: In what banks and what were the balances as of the date you filed your petition?

10. When you filed your petition, did you have:

a. any cash on hand?
b. any U.S. savings bonds?
c. any other stocks or bonds?
d. any certificates of deposit?
e. a safe deposit box in your name or in anyone else’s name?

11. Do you own an automobile? If yes: What is the year, make, and value? Do you owe any money on it? Is it insured?

12. Are you the owner of any cash value life insurance policies? If yes: State the name ofthe company, face amount of the policy, cash surrender value, if any, and the beneficiaries.

13. Do you have any winning lottery tickets?

14. Do you anticipate that you might realize any property, cash or otherwise, as a result of a divorce or separation proceeding?

15. Have you been engaged in any business during the last six years? If yes: Where and when? What happened to the assets of the business?

Source: Executive Office of U.S. Trustee, Handbook for Standing Trustees, Effective 03/01/06 App C-2

For more information about filing for bankruptcy please contact Kansas City bankruptcy attorney Cary Smalley at The Smalley Law Firm at (913) 601-3549.

Chapter 7 Bankruptcy While Behind On House Payments

Many people ask if they can file a Chapter 7 bankruptcy in Kansas City when they are not current on their house payments.  The answer is yes, but you may not want to if you are trying to stay in your home.  If you cannot catch up quickly on your house payments, a Chapter 7 bankruptcy in Kansas City will not protect you from foreclosure.

The automatic stay prevents creditors from taking any more action against you but it does not extend after your bankruptcy is completed.  I suggest being current on your house payments when filing a Chapter 7 bankruptcy.  Chapter 7 bankruptcy is more designed for individuals with unsecured debt. 

Chapter 13 bankruptcy in Kansas City may be a better option for you if you have a lot of secured debt.  For example, if you are behind on your house payments, Chapter 13 allows you to catch up on your house payments over a 3 to 5 year period through your Chapter 13 repayment plan.   For more information please visit my website at http://www.thesmalleylawfirm.com or call me at (913) 601-3549 for a free consultation.

Back To School Time-Let's Discuss Student Loans and Bankruptcy

It's already that time of year again.  The little ones are all getting ready to head back for the start of the school year, as are college students  With that in mind, I wanted to discuss how student loan debt is dealt with in bankruptcy.

Student loans are not typically discharged in bankruptcy.  They are generally treated differently than most other unsecured debts in bankruptcy.  Traditionally student loans received from a governmental agency are not discharged/eliminated through the bankruptcy process.  When the Bankruptcy Code was revised in 2005 student loan debt received additional protections and now even private students loans that were taken out solely for higher educational purposes are generally not discharged in bankruptcy.

There is an exception to the rule for undue hardship.  Your bankruptcy attorney can ask the Bankruptcy Court to look at an individual situation to determine if requiring the debtor to repay the student loan would create an undue hardship.  The debtor must show the following to qualify for undue hardship:
1) inability to maintain a "minimal standard of living";
2) which state of affairs will likely persist for significant period of repayment period; and
3) that debtor has made good faith efforts to repay

Courts have been very reluctant to apply the undue hardship exception and often require an exceptional set of factual circumstances to do so.

However, if filing a Chapter 13 Bankruptcy in Kansas City, your students loans may be deferred during the Ch. 13 payment plan, where you do not make direct payments to your student loan lender during that time period.  A 3 or 5 year period of not being required to pay your student loans may help with other debt problems.

Please call me, Kansas City bankruptcy attorney Cary Smalley, at (913) 601-3549 or visit www.thesmalleylawfirm.com for a free consultation or to discuss these issues further.  Thanks for reading!

Welcome to "Kansas City Bankruptcy Attorney"

Welcome to Kansas City Bankruptcy Attorney Blog, the official Kansas City Bankrutpcy blog of The Smalley Law Firm, LLC.  I have created this blog to provide news, information and musings regarding bankruptcy and to allow you, hopefully a potential client, to learn a little bit more about me and how I can help you with your potential bankruptcy filing.

I am a Kansas City native and graduated from both college and law school at the University of Kansas.  I spent my first five and a half years practicing at a mid-sized Kansas City litigation firm.  I decided to start my own law practice to focus on helping consumers through the bankruptcy process and to provide the level of client service and support that I believe everyone is entitled to.

I am a Kansas City Bankruptcy Lawyer so that I can help others overcome their financial difficulties and provide them with a fresh start.  To learn more about about me and bankruptcy, please check out my website, http://www.thesmalleylawfirm.com  Welcome to my blog!  Please feel free to leave any comments or questions you may have.  Thanks!