Thursday, October 10, 2013

Rapper DMX files Bankruptcy

DMX (Born Earl Simmons) filed for Chapter 11 bankruptcy due to poor financial management. The Chapter 11 petition lists less than $50,000 in assets and $1 million to $10 million in debt. The New York native owes $1.24 million in child support and more than $21,000 on an auto lease.

Can Child Support be Erased?
No. Child support cannot be erased or legally discharged in a bankruptcy case but Chapter 11 bankruptcy does allow debtors to propose a reasonable repayment plan to cure the child support arrearage.

Why did DMX file Bankruptcy?
The State Department will not issue a passport to anyone that has more than $2,500.00 in child support arrearage. DMX has an upcoming international concert tour and the filing of the bankruptcy case allows him to get his passport back and travel abroad.

Thursday, October 3, 2013

The Genesis of Bankruptcy Law

Consumers file bankruptcy cases in order to obtain a bankruptcy discharge.  A bankruptcy discharge releases the consumer from personal liability for certain specified types of debts. In other words, the consumer is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the consumer from taking any form of collection action on discharged debts, including legal action and communications with the consumer, such as telephone calls, letters, and personal contacts.

Bankruptcy and the Bible - Is Bankruptcy Moral?

Many people think of bankruptcy as an “immoral” act, and that erasing their debts somehow turns them into a “bad” person. The truth is that bankruptcy is deeply rooted in the Bible and that Biblical doctrine actually inspired Congress to pass the first bankruptcy laws in the United States on April 4, 1800.

The “bankruptcy discharge” actually originated from the book of Deuteronomy, which ordered lenders to release borrowers from their debts every seven years.  The book of Deuteronomy states:

“At the end of every seven years thou shalt make a release. And this is the manner of the release; every creditor shall release that which he has lent unto his neighbor and his brother; because the Lord’s release hath been proclaimed.”  (Deut. 15:1-2)

Forgiveness of Debts - Old Testament

The Old Testament is full of examples of the compassionate treatment of the poor.   For instance, Deuteronomy 15:7-10 is particularly forceful.  It reads:


“If there is a poor man among your brothers...do not be hardhearted or tightfisted toward your poor brother.  Rather be open-handed and freely lend him whatever he needs.  Be careful not to harbor this wicked thought: "The seventh year, the year for canceling debts, is near," so that you show ill toward your needy brother and give him nothing.  He may then appeal to the LORD against you, and you will be found guilty of sin.  Give generously to him and do so without a grudging heart; then because of this the LORD your God will bless you in all your work and in everything you put your hands to."

Tuesday, October 1, 2013

What happens in a Chapter 7 bankruptcy case?

Chapter 7 bankruptcy cases are usually straightforward.  On rare occasions, complications arise if creditors take aggressive action, if the trustee thinks you are hiding assets, or if you want to challenge creditors’ claims.

Who can file?
Any individual who lives in the United States or has property or a business in the United States can file a chapter 7 bankruptcy. If you received a chapter 7 bankruptcy discharge within the past eight years, you are disqualified from receiving a discharge in chapter 7. A similar disqualification may also apply if you received a discharge within the past six years in a chapter 13 case in which your unsecured creditors were paid less than 70% of what they were owed.

What is the means test?
In 2005, Congress added the “means test” to the bankruptcy law to make it more difficult for wealthy consumers to file chapter 7 bankruptcy. Most consumers who file for bankruptcy are not affected by this change. If your income is below the median in Pennsylvania, you are protected by a “safe harbor” and not subject to the means test. The current median family income figures for Pennsylvania are available on the website for the Untied States Trustee Program at: www.usdoj.gov/ust. 

What are the first steps?
The first step in a chapter 7 bankruptcy is completion of certain basic forms. These include a three-page initial “petition.” You will also need to file a certificate from an approved credit counseling agency.  A number of other forms must also be filed either at the same time of the petition or shortly afterwards. These include your statement of financial affairs, statement of intentions with respect to certain secured debts, statement of monthly income and means test calculations, copies of any pay stubs you received from an employer during the sixty days before filing your bankruptcy case; and a set of schedules listing all your debts, assets, income, and expenses. It is important that all of these forms be filled out completely and accurately.

What are common mistakes?

A chapter 7 bankruptcy is often called a “liquidation” bankruptcy because the debtors assets are examined by the court appointed  trustee and any “unexempt” assets are typically sold for the benefit of creditors.  Frequently overlooked assets include tax refunds, child support arrearages, security deposits, pledged goods at pawnbrokers, personal injury claims, other legal claims, and the cash value of life insurance policies.