CHAPTER 7 – SIGNING MEMORANDUM
The purpose of this memo is to bring your attention certain
matters and information that are of importance to you. If you have questions, be sure to ask
us. We are here to help.
Chapter
7: Any inheritance, property or lottery winnings you acquire during the 6
months after we filed your case becomes part of this bankruptcy estate. The trustee will require the funds to be
turned over immediately.
Failure to notify/report any after acquired funds or
property could result in the dismissal of your case, or if you have already
received a discharge, the revoking of that discharge. This is extremely important and you agree to
comply with this requirement.
DISCHARGED DEBT IS NOT TAXABLE
Any debt discharged through a bankruptcy proceeding is NOT
taxable. Many creditors will still send
out 1099 forms even though you have discharged their debt in a bankruptcy. You need to file a form 982 to alert the irs
to the discharged debt. We are not tax
preparation advisors, so you’ll need to consult whoever assists you with taxes
or do this yourself. If you don’t, the IRS may audit your return and assess tax
based on 1099c income.
If you are reaffirming a debt, you must be current on the
payments. You will probably not continue to
get statements from the creditor, so if you normally get these in the
mail, you should write down the payment information, address, amount, account
number, due date, etc., so that you will be able to continue to send statements
in. If the creditor has set up an automatic pay deduction from your bank
account, this will probably stop. So,
make sure you check your bank account to see if the creditor is still deducting
payments. If they are not, then it is
your responsibility to send the payment in yourself.
If you fail to pay on time you may lose the property. The creditor will prepare the reaffirmation
documents and send them to our office, and we will then complete them and send
them to you. You must immediately sign
and return the documents to us. If you
don’t we may not be able to return them to the creditor in time to allow the
creditor to file them in time and your reaffirmation will not be
effective. We do not file these
documents. If you do not reaffirm in a
timely manner, this does not mean that you will lose the property. If you continue to pay on time, in most cases
the creditor will continue to take the payments and you will keep the
property. Most mortgage companies do not
send reaffirmation agreements. When this
happens, the debt is actually discharged, and if the property is later
foreclosed on, you will not owe any money at all. The mortgage companies will usually not
continue to report your payments to credit bureaus, however, so if you have any
concern about this you need to discuss it with the attorney in time to file a
reaffirmation agreement if you desire to do so. We generally do not recommend
that you sign any reaffirmation agreement unless it is absolutely required by
the creditor. If a reaffirmation
agreement is not timely filed, there is no way to “go back” and file it later.
Certain creditors refuse to
prepare reaffirmation agreements and expect you to prepare the agreement on
their behalf. In the event one of your creditors takes this position, we
will notify you and you will be given two options. 1) You can hire our
law firm to prepare the reaffirmation agreement on behalf of the
creditor. This will be an additional legal fee of $400. 2) You can
not reaffirm the debt and continue to make payments to the creditor. The
creditor may permit you retain the collateral, but your payments will not be
reported to the credit bureaus and you may not receive billing statements. Ford Motor Credit will repossess your car
even if current, unless you sign a reaffirmation agreement.
You have
listed someone in your bankruptcy petition as a co-debtor or someone who is
co-signed on a debt you have. In Chapter
7, you will receive a discharge on this debt unless you reaffirm the debt
(agree to be liable on it). The
co-signer will not be protected.
We are
giving you this memo, and placing a copy of it in your file, to record the fact
that you have been advised of the co-debtor issue, what the effect of your
filing will be on the co-debtor, and to provide you with yet another
opportunity to discuss this matter with your attorney and be sure you
understand exactly what the legal effect of your filing may be on the
co-debtor.
We don’t
represent the creditors, and while we have a great deal of experience and can
tell you what creditors will generally do in a particular situation, you must
realize that we are not in a position to guarantee what a particular creditor
will or will not do in your case.
I acknowledge a copy of this memo and understand that my
filing will not protect co-debtors except as indicated above.
(Child Support and Alimony)
In order to receive your discharge, you MUST be current on
your Domestic Support Obligation. That
means that if you have any arrearage, you must be making your current payment,
as well as some type of additional payment that includes this arrearage. If you are not current on this type of an
arrangement, YOU WILL NOT RECEIVE A DISCHARGE.
If you owe child support, spousal support (alimony), or if
you have been ordered to pay any debts or deliver any property to an ex-spouse,
that obligation is NOT discharged in your chapter 7 bankruptcy case.
If you have any questions about the dischargability of any
of these obligations, discuss this with the attorney before your case is filed.
NOTE: Pursuant to Bankruptcy Rules, the obligee of
your Domestic Support Obligation WILL RECEIVE NOTICE OF YOUR FILING. The Trustee is required to send out a notice
to this person(s) and unfortunately, this is unavoidable. We are notifying you about this now in the
event this causes you concern.
By signing below, you acknowledge that you understand the
limitations on the discharge of marital debts and obligations, and have had an
opportunity to discuss the matter with the attorney and you are electing to
proceed with a chapter 7 filing.
ACH (auto deduct) payments
for house and vehicles
If you currently have your house and/or car payments
automatically deducted from your bank account, this may STOP after the filing
of your bankruptcy. Creditors are
typically very concerned about violating the automatic stay that goes into
place once your case is filed, and for that reason, may stop automatically
deducting your regular, monthly payments.
You are advised that when your house and/or car payment is
coming due after your case filed, you must monitor your account to see if the
payment comes out. If it does not come
out automatically, you MUST STILL MAKE THE PAYMENT. While you are in the bankruptcy, you may need
to continue to make the regular payment via mail, or bringing the check
directly to your bank, as you must remain current on these debts for which you
are reaffirming. After your bankruptcy
is completed, most banks will allow you to sign up for the automatic deductions
again.
This is also true for making payments online, which some
banks may also stop during the pendency of your bankruptcy case. Again, this may resume upon the completion of
your case.
By signing below, you understand this potential issue and
will continue to make your regular house and/or car payments if you are
reaffirming (keeping) these debts, even if they are not automatically deducted
or you are unable to pay them online.
Your bankruptcy schedules list an education or student loan.
You are advised that the bankruptcy does not discharge
student loans.
While in bankruptcy the creditor is not permitted to attempt
to collect the debt, but the debt will not be discharged, and interest will
continue to accrue.
If your case is a chapter 7, you may wish to continue to
make payments on the debt, although while your bankruptcy is open the creditor
cannot request or force you to make payments.
Fortunately, for most, the discharge of the other debt makes
the payment of the non-discharged student loan possible and you should be able
to resolve it more easily after all the other debt is paid or discharged.
In chapter 7, most taxes are not discharged. You have listed taxes on your bankruptcy that
will not be discharged. The government,
Federal, State and Local, may not attempt to collect your taxes while you are
in an open bankruptcy, but your case will normally be closed in about 5 months
from the time it is filed. After that,
you can expect that the tax authorities will try to collect the taxes. You should contact the appropriate office to
discuss a payment plan with them.
If, after discharging debt in a bankruptcy, you still cannot
pay the taxes you owe, you might seek to be placed in an uncollectible status,
file an offer in compromise, or make some other arrangements. These are not part of the representation our
office provides to you. You will need to
handle the matter yourself or have some other professional attempt to assist
you. We don’t offer tax services.
Income taxes that are older than three years (from the due
date, including any extensions) may be discharged in a chapter 7 if certain
conditions are met. Note that any tax
liens that may have been filed will survive the bankruptcy, and remain attached
to property even if your personal liability to pay the tax is discharged in the
bankruptcy. You have already discussed
this with the attorney if you are being given this memo, but do feel free to
ask any additional questions that you may have.
We do not guarantee that the taxing authorities will automatically take
the proper steps to reflect your discharge of the taxes. In the event that you do have taxes that
should be discharged in your case and you require additional bankruptcy related
assistance with tax issues after your case is over, you will be required to
retain us for that matter, subject to a new fee agreement.
If you are seeking to discharge condominium fees, you are
advised that only those fees arising before you file your petition
may be discharged. If you continue to
live, or have the right to continue to live, in the condominium, any new fees
incurred during that time are your responsibility and are not discharged.
For example, if you are permitting your condo to be
surrendered to the bank and allow a foreclosure, then you will be responsible
for all condo fees until you no longer have a right to live in the condo. This could be months, as foreclosure sales
often do take months. You will continue
to be responsible for and can be sued for, fees that arise after your
bankruptcy.
The purpose of this memo is to alert you to your
responsibility with respect to the house, so that you don’t end up with
problems later.
If you have any questions about
this, speak to your attorney
HSA ACCOUNTS ARE NOT
PROTECTED
If you have money in an HSA account, you should know that
some trustees will require that it be turned over to the Court. There is NO legal protection for these
accounts. Some trustees do not take them but you have the legal obligation to
turn the account funs over if requested to do so.
By retaining the firm and signing our retaining
agreement, you also agree to review this memorandum, and ask any questions you
may have before your case is filed.
