YES, BANKRUPTCY IS STILL ALIVE!

Effective October 17, 2005, new bankruptcy laws were enacted which have resulted in significant changes to the bankruptcy process.  Contrary to what many people believe, however, bankruptcy protection is NOT a thing of the past, and the Law Office of J. Michael Clay is working hard to keep its clients fully informed of the new laws and the effects those laws will have on new bankruptcy filings.

Bankruptcy law is a highly complex and rule-specific process. There are many considerations that must go into your decision whether or not to file bankruptcy, and which bankruptcy process may be the correct option for you. San Antonio bankruptcy attorney J. Michael Clay is experienced in the field of consumer bankruptcy law and has helped many clients protect their assets and make the decisions that are right for them.

The process of personal bankruptcy under chapter 7 or Chapter 13 of the U.S. Bankruptcy Code involves a process of either discharging debt or reorganizing debt. This process takes into account several factors, including amount of debt and the kind of debt involved.Secured debt is debt that is backed by collateral such as a mortgage or a car loan. Unsecured debt is debt that is not backed by collateral, such as credit card debt and medical bills. The bankruptcy process also considers the amount of assets, as well as the types of assets involved that might be available to discharge the debt. These include property, real estate, cash accounts, receivable sand securities, etc. Under state and federal rules, many, if not all,of these assets may be treated as exempt, thus protected from the reach of creditors and the Bankruptcy Trustee.

Depending on these and related considerations set out below, the methods of handling consumer debt through bankruptcy are mandated by two primary chapters of the U.S. Bankruptcy code. Chapter 7 is a process of discharging debt through liquidation of assets. Under this plan,non-exempt assets are sold and the proceeds are used to pay off creditors in priority of their secured interest. In the vast majority of consumer cases, however, virtually all assets are exempt from sale or seizure, and there are no assets available to liquidate.

Chapter 13 is a plan to consolidate debt through reorganization.Under this plane, debtors are allowed to restructure their payment sand a new payment schedule is set up under which creditors are prioritized. The schedule usually calls for payments to occur over a period of not more than 5 years. Debts that would require more than 5years to pay off, such as mortgages, are paid outside the plan and not included in the plan payment, although any mortgage arrears (past due house payments) would be paid through the plan.

After filing bankruptcy under Chapter 7 or Chapter 13, the plan to discharge or restructure debt must be approved in the United States bankruptcy Court. In Chapter 13 proceedings, we will create a plan that is fair and manageable. In Chapter 7 proceedings, we will conduct the proceeding expeditiously and efficiently. We will communicate with you regularly and inform you of all relevant legal actions. We will advise you of the consequences of all decisions,including credit, foreclosure, garnishments, loans after bankruptcy,credit car, mortgage and related considerations.

Eligibility Under New Bankruptcy Laws

The new bankruptcy rules also take into consideration the Debtors' income(s).  If the Debtors' income is equal to or less than the state median income, then eligibility for Chapter 7 or Chapter 13 will not be significantly different than under the old bankruptcy laws.  Currently, the "Median Income" levels are approximately as follows:

1-person family:    $33,280

2-person family:    $46,454

3-person family:    $48,755

4 person family:    $56,246

Tor each additional family member over 4, add $6,300 per person to 4-person median income.

Under the new bankruptcy laws, if the Debtors' total annual gross income exceeds the median income levels set out above, the Debtor must then pass a "Means Test."  The "Means Test" calculates the Debtors' theoretical disposable monthly income by imposing IRS National Expense Standards, and then compares the Debtor's theoretical, or "allowed" monthly expenses with the Debtors' net income (after accounting for all mandatory deductions from the Debtor's gross pay).  If the Debtor's net income is greater than the Debtor's theoretical "allowed" monthly expenses, then the Debtor may be ineligible for Chapter 7 protection and may be forced to file under Chapter 13.  Under many circumstances, however, the Debtor may still be eligible for Chapter 7 protection even if the Debtor's income exceeds the state's median income.

The new bankruptcy rules also provide for mandatory debt counseling prior to filing, as well as a mandatory "financial management" counseling after filing.  The counseling must be provided by an organization approved by the U.S. Bankruptcy Court.  Additionally, the new rules place more responsibility on bankruptcy attorneys to ensure that their clients have fully and honestly disclosed all information relevant to the bankruptcy proceeding.

At the Law Office of J. Michael Clay, we provide skilled advocacy and know how to use the bankruptcy laws to the advantage of our clients.We take the time to talk to you and understand your needs and your situation. We will evaluate your circumstances and all bankruptcy information that you provide. We then explain to you in the available options and fashion the plan that best meets your needs and protects your interests.  Although the new bankruptcy laws have made significant changes to the bankruptcy process, The Law Office of J. Michael Clay is working diligently to keep our clients fully informed of their rights and responsibilities.

If you are interested in knowing more about the bankruptcy process, contact us online or call 210-694-5205 to schedule a free initial consultation.