bankruptcy blog
Zoom Cat & the Practice of Law
By now, millions of people have seen the viral video of the cat-filtered attorney appearing in court via Zoom. First, this video is hilarious, bringing much needed levity to the usual stuffy visuals of the practice of law. Second, it illustrates how technological innovation in the practice of law is here and isn't going anywhere.
In the last year, I have not met with one client or opposing counsel in person. I have not physically appeared in any courtroom. I haven't printed one document for a client to sign. Yet, my practice has still functioned and actually thrived. I've continued to gain and serve clients statewide - all through the use of technology.
In bankruptcy court, I had a trial via Zoom, which otherwise would have required all parties to travel to Lincoln. My client would have had to paid me for the two hours of travel to and from the trial, which is customary practice to pay your attorney for travel time. Instead, I commuted downstairs to my basement where I had a proverbial command station setup with an iPad, two laptops, iPhone, and a TV monitor ready to go. I could never have had such a setup in a physical courtroom. I had extra time to prepare for the trial instead of wasting it on commuting, finding parking, and the anxiety of driving to Lincoln from Omaha (a lot can happen driving on I-80).
The 341 Meeting of Creditors, usually the only court hearing in a consumer bankruptcy case, is now being conducted telephonically. In some jurisdictions, these 341 Meetings are being conducted via Zoom or Skype. The typical meeting lasts only 5-10 minutes. I used to jokingly inform my clients that the hardest part about those meetings was finding parking near the Federal Courthouse. Depending upon where a debtor lives, sometimes they'd have to travel several hours to the courthouse to appear in person. Now they don't have to. The purpose of the meeting is still achieved without the person needing to appear physically in Court. Putting 30-40 strangers in a room would seem to be a foolish return to normal. The same could be said of other courtroom formats such as with the traditional cattle call of eviction court.
The bankruptcy court in Nebraska has been a trailblazer when it comes to adapting to new technologies, being the first jurisdiction to permit electronic/digital signatures in lieu of "wet ink" signatures. The client pulls the document up and his or her phone and -BAM- the document is signed. A process that used to take days or weeks, obtaining client signature, sometimes now can only take seconds. More courts need to recognize that requiring "wet ink" signatures is antiquated, a bygone practice of a different time.
Clients have a much different set of expectations now. Technology has made everything instant (or nearly instant). The legal profession and the courts are notoriously slow to change and to adopt new ways of doing things, but the pandemic has forced adaptation. The pandemic has shown how adapting may have its hiccups (Exhibit A - Zoom Cat), but that making the leap to use of more technology was much closer to realization than many would have thought or wanted to admit. Right now, many consumers can do anything they need from their smartphone. They can pay bills, transfer money to friends, complete and file their tax returns, request prescription refills, schedule car maintenance, schedule an Uber or Lyft ride, etc. I could go on and on, but I think you get the point. Interacting with the Court or an attorney should be that easy. It is confusing that it isn't that easy.
Attorneys will need to adapt or fall by the wayside. Courts will need to continue to adapt by adopting technology to facilitate increased access to justice and efficiency. Numerous court hearings could and should be conducted without the need to physically appear in Court. At this point, it would be plain ridiculous to expect that we can put this cat back in its bag. Zoom Cat is here to stay.
Instead of worrying what will come next, meet with a bankruptcy attorney to discover your options tailored to your situation.
Don't Miss These Deadlines
With an economic downturn on the horizon, there is likely to be a high rate a default on credit cards, home mortgages, and car loans. Nebraskans will need to know what deadlines that they must pay attention to in order to avoid an emergency or disaster.
Answering Lawsuit. You have 30 days from being served with a lawsuit to file a response. If you miss this deadline, the plaintiff (creditor) bringing the lawsuit, can obtain a default judgment and move forward with garnishing your wages and/or your bank accounts. The Nebraska Supreme Court provides a general answer and denial for you to prepare and file with the court.
Claiming Exemptions. If a creditor obtains a judgment against you and moves forward with garnishing your bank account, you should receive a Notice to Judgment Debtor. You have to move swiftly having only 3 business days from receiving the notice to request a hearing to determine if the account is exempt. In Nebraska, you have a $5,000 wildcard exemption to protect a bank account, meaning if you have $5,000 or less in your account it is fully exempt (protected).
Trust Deed Foreclosure. Most foreclosures in Nebraska are completed pursuant to the Nebraska Trust Deed Act, meaning that the creditor/lender does not have to initiate a court action to foreclose. The lender simply has to file a Notice of Default with the Register of Deeds for the county where the Deed of Trust is filed. The lender will send that Notice by certified mail to the borrower. The lender then has to wait 30 days after filing the Notice of Default before publishing notice of sale, which has to run for five (5) consecutive weeks. Once the sale takes place, there is no right of redemption in Nebraska.
Right to Cure Car Loan. The lender has to provide written notice to the borrower that the borrower has 20 days to cure the default from borrower's failure to make a required payment. If the default is not cured, then the borrower can accelerate the loan, making the entirety of the loan due, and pursue repossession. The lender is not required to provide the same notice and the borrower has no right to cure.
Instead of worrying what will come next, meet with a bankruptcy attorney to discover your options tailored to your situation. Patino Law Office is a boutique bankruptcy firm located in Omaha, Nebraska providing services statewide.
The Head and the Heart: A Holistic Approach to Bankruptcy
We are here to help. It is a sound bite that I wholeheartedly include in many emails and conversations with clients. It is not merely a slogan or a marketing ploy. In many instances, a client is coming to us at his or her lowest point, faced with having to file bankruptcy to deal with insurmountable debt. As a bankruptcy attorney, I am here to empower the client on the path forward, providing support beyond what is required to comply with the bankruptcy laws.
In my practice, I am here for clients experiencing the joys of babies being born and for the heartbreaks of the passing of a loved one. I am here to see bankruptcy clients as more than just a bucket of debt. People seeking bankruptcy relief crave stability, clarity, and ease. This is all accomplished through providing a bankruptcy practice that provides a heart-centered process. In the end, the law is the law, but it is how a client experiences legal support that makes the real impression.
Bankruptcy is a tough legal process to navigate on your own because of the technical requirements and the legal customs that only a practitioner can know and appreciate. To assist clients as they navigate the process, we have developed a bankruptcy framework that is consistent, but at the same time highly adaptable to specific needs (be that legal or otherwise).
Initial Consultation. The bankruptcy process begins with a free consultation with one of our bankruptcy attorneys. Our client service manager works with you to schedule the appointment. During the consultation, the attorney hears your story and educated on the solutions available to you.
Hiring Attorney. After the consult, the bankruptcy attorney will collaborate with our client service manager to determine a fee tailored to your situation. If you decide to move forward with your bankruptcy, you will pay the attorneys fees and bankruptcy filing fee.
Bankruptcy Drafting. Once you have hired the firm, you will receive a comprehensive list of information and documentation specifically needed for your bankruptcy team to draft the bankruptcy paperwork.
Review and Sign Appointment. Once your bankruptcy paperwork is drafted, your bankruptcy attorney will meet with you to review it to ensure accuracy and that you understand the paperwork that will be filed on your behalf.
Bankruptcy Court. Your bankruptcy attorney will attend the bankruptcy court hearing with you. It is important to us that you feel supported and comfortable going to court.
Deciding whether to file a bankruptcy is a complex and emotional decision. Finding the right attorney to work with you to make that decision is crucial. Instead of worrying what will come next, you should meet with a bankruptcy attorney with a heart to discover your options for dealing with your financial situation.
Chapter 7 Bankruptcy: Five Common Misconceptions
1. Chapter 7 bankruptcy will ruin my credit for 7 years
It is true that the bankruptcy is reported for up to 7 years after you file your bankruptcy. However, it does not negatively affect you for that long. At the end of your Chapter 7 bankruptcy, you will be debt free (with some exceptions like student loans), which positively impacts your credit. I’ve had clients finance car and home purchases without issue after their bankruptcy cases.
2. I’m going to lose my house and car
This almost never occurs . In Nebraska, you can protect and keep your home as long as you are current on payments when you file and your home has $60,000 or less in equity.
As for your car, you can retain and keep it, if you’re current on payments and your vehicle has less than $10,000 in equity. This is because in Nebraska, you can use the vehicle exemption, which is $5,000, and the wild card exemption, which is $5,000, to protect one vehicle. For a couple filing the Chapter 7 bankruptcy jointly, those amounts can be doubled.
3. Filing bankruptcy is only for people that are behind on making payments
You don’t have to be behind to file bankruptcy. Actually, the best time to look into whether to file is prior to or soon after defaulting on payments.
Example: Your monthly minimum payments are $1,000. You were able to keep up with the payments until your former girlfriend decided she was going to move out. With less income coming into your household, you won’t be able to make next month’s credit card payments.
4. I make too much money to file Chapter 7 bankruptcy
The bankruptcy law includes something called the Means Test, which takes an average of your monthly income for the last six (6) months from all sources (excluding Social Security income), annualizes it (multiplies by 12), and compares it to the median income for your household size. If you’re below the median, you are good to go with a Chapter 7 bankruptcy. If you are above median, you usually are not. However, the Means Test has a 2nd step if you’re above median income that takes into account qualified and allowed expenses (i.e. child support payments, taxes, child care, etc.). Sometimes you may still qualify for a Chapter 7 bankruptcy after this 2nd step even though initially your income was “too high”.
5. If I file, my spouse has to file bankruptcy with me
You are allowed to file a bankruptcy without your spouse. Sometimes this makes a lot of sense. Two common scenarios are when your debt was incurred prior to marriage or you have business-related debt that is only in your name. If you are married and decide to file Chapter 7 bankruptcy without your spouse, you may still have to provide your spouse’s income and assets. However, your spouse’s identifying information, such as Social Security number and name do not have to be disclosed.
There is a lot of misinformation and fear on the internet regarding Chapter 7 bankruptcy, much of which is false and keeps people from using a viable solution to address their debts and move forward.
Learn more about Chapter 7 bankruptcy.
Transferring Property Before Bankruptcy
“I can just give my truck to my brother, right?” Many clients and prospective clients have asked me some variation of this question. The quick answer is an outright “no” because doing so may be a fraudulent transfer.
Under Nebraska State Law, a person cannot simply transfer an asset without receiving reasonably equivalent value in exchange for the transfer if that person is insolvent or if the person becomes insolvent as a result of the transfer. Otherwise, a person would have incentive to transfer all property to another without receiving anything in exchange if they were trying to shield assets from their creditors or from liquidation in a Chapter 7 bankruptcy.
For example: You own a truck worth $15,000. As I have previously discussed, you will be able to exempt $10,000 under the new Nebraska Exemption Laws, leaving $5,000 as unexempt (unprotected) and subject to liquidation in a Ch.7. If you simply re-titled the vehicle in your brother’s name without receiving any payment and then file Chapter 7 bankruptcy, the Chapter 7 Trustee may go get the truck from your brother and undo the transfer.
The look-back period under Nebraska State Law is four (4) years, meaning that your creditors or the Chapter 7 Trustee can look at all transfers made within four (4) years to see whether or not a fraudulent transfer has occurred. Under bankruptcy law, the look-back period is two (2) years.
Under bankruptcy law, you may be denied your discharge (elimination of legal obligation on your debts) if you transferred property within the one year prior to filing with the intent to hinder, delay, or defraud a creditor. A creditor would have to bring a lawsuit (called an adversary proceeding) against you to have the Bankruptcy Court determine that you should be denied a discharge. Even though these are uncommon actions that creditors bring, it is still something to be mindful of.
For example: If you gave title to your brother without him paying for it, you would have to list that in your eventual bankruptcy paperwork. A creditor that is paying attention may use that as evidence that you should be denied your discharge.
You can avoid these issues by doing one of the following:
- Receive proper value for the transfer. Your brother can buy your truck for $15,000.
- Undo the transfer. Have your brother transfer the truck’s title back to you.
- File a Ch. 13 bankruptcy. You can repay the value of the transferred asset to your creditors through a 3-5 year repayment plan.
- Wait to file. If you cannot do one of the above actions, you can choose to wait beyond the reach of the look-back period.
Bankruptcy Isn’t as Scary as You Think
You may be struggling with your debt, wading through a sea of information and misinformation online regarding possible solutions. Most quests for knowledge start with a question posed to Google. “Should I hire a bankruptcy attorney or hire a debt settlement company?” On the radio, you may have heard the tantalizing advertisements where a debt settlement company promises to get you out of debt without filing for bankruptcy.
Pay 50% of your debt. Be debt free fast. The debt settlement ad usually also mentions a key fear of anyone struggling with debt, if you file for bankruptcy you will lose your house, car, and other personal possessions.
First, in well over 90% of Chapter 7 bankruptcy cases, the person who discharges their debt retains all of their property. However, I have seen situations where a person liquidates a retirement account to settle debt only to later find out that their retirement would have been 100% protected in a bankruptcy in Nebraska. The other downer was that the liquidated retirement money only went to paying for a debt settlement company’s fees and not towards any of the person’s debt.
Second, many people struggling with debt are not in the position to pay on any of their debt let alone settle it for 50%. When your income is just enough to cover basic living expenses (housing, food, clothing, transportation, etc.), a bankruptcy that discharges your debts makes the most sense. Hiring a debt settlement company almost always delays the inevitable.
Third, a bankruptcy is the faster and more efficient solution. The Chapter 7 bankruptcy can take only 3-4 months and it handles all of your debt at one time (with some exceptions like student loans and some tax debts). A debt settlement company may not be able to settle your debts for 2-3 years. Additionally, many creditors require you to default and be in default for quite some time before being open to settling. While they wait, interest, penalties, and even attorney’s fees accrue.
Fourth, the cost of filing a Chapter 7 bankruptcy is extremely affordable as compared to a debt settlement company’s fees. The general cost of a consumer Chapter 7 case can range from $1,500 to $2,500. A debt settlement company charges a percentage of the cancelled debt. Additionally, you may be at risk of paying taxes on the cancelled portion of the debt.
For example: You had $10,000 worth of credit card debt. By the time the debt settlement company settles the debt, you owe $15,000 because of the accruing interest, penalties, and attorney’s fees. After liquidating a retirement account, you pay $7,500 to the creditor as a part of the settlement. You pay 20% of the cancelled amount ($7,500), which is $1,500, to the debt settlement company for its fee. The total you paid was $9,000, which is only $1,000 less than the original principal balance. On top of that, you receive a 1099-C at tax time and may owe taxes on the cancelled portion of the debt. Overall you may end up paying back 100% or more of the original debt.
If you filed a Chapter 7 bankruptcy instead, you would have paid $1,500 to an experienced bankruptcy attorney. You would have kept your $7,500 retirement account. You would have eliminated your legal obligation to pay the $10,000 debt and would suffer no potential income tax consequences come tax time. In effect, you saved $8,500 and achieved the same end result.
When figuring out how to handle your debt, it can be overwhelming. Meeting with an experienced Nebraska bankruptcy attorney who can comprehensively provide you with your bankruptcy and non-bankruptcy options is a good place to start.