713Bankruptcy.Com's Blog

Because we are at the end of a month, and I am running into some bankruptcy petitions that are expiring, I felt it an appropriate time to write an article about this subject.

For starters, does a bankruptcy petition really expire?  Yes…sort of.

What this is referring to is the fact that a bankruptcy petition is a snapshot in time, of the debtor’s financial situation.

Schedule I reflects the current or most recent income (or lack thereof), and the Means Test (Form 22a in a Chapter 7 or Form 22c in a Chapter 13), reflects the debtors income for the last six FULL months.

Once a bankruptcy petition is prepared to show this financial picture, it must be filed with the court before the end of the month it is prepared in.  Why?  Because if it isn’t filed by the end of the month and the calendar flips over to a new month, the debtor’s financial picture may have changed, and the petition must be updated accordingly so that the Means Test still shows the last six full months of income.

This rolling over to a new month will have caused the sixth month to have rolled off of the six month snapshot, as it becomes the seventh month, and the month that just passed now becomes the most recent month that needs to be reported in the petition.

Furthermore, the income on Schedule I needs to reflect the most recent income, and should be updated with any changes shown on the debtor’s most recent pay stub or business profit and loss statement (P&L).

Once the data in the petition is updated, it is then again ready to file, and you have until the end of the new month to get it filed, before it expires again.  I refer to this process of updating the information listed in the petition in order to be current as “Refreshing” the petition.  I have also heard this referred to as “bringing the petition current”, or the “Means Test expiring”.

The need to refresh petitions is something that would be nice to avoid, but there are a number of situations and unforeseen circumstances that can lead to this, such as the debtor not providing needed information in a timely fashion (this is the most common), the debtor getting cold feet, the attorney having the client wait to file for some reason, or a myriad of other things.

Simply updating Schedule I and the Means test may not be enough though.  There are other things within the petition that could “expire”, or that may need to be updated as a result of rolling over into a new month, including arrearages on liens, and payments to creditors.

Keep in mind too, that with updated information, there may be changes, which could change other things in a petition, such as the amount of disposable monthly income for a Chapter 13 Plan payment.

The list below can serve as a checklist of things you will want to verify, and update if necessary, when refreshing an expired bankruptcy petition:

1. Schedule I

a. Income and deductions must be updated to reflect current pay stubs or business profit and loss statements (P&L’s)

2. Means Test

a. Income must be updated to include any months that have elapsed since previously entered
b. Double-check other items for changes, such as costs of insurance, 401k loan payments or contributions, etc.

3. Arrears on all Secured Property

a. Are the items previously documented as being in arrears, now additional months in arrears?  Update this (Creditor tab)
b. Update the cure amount – # of months in arrears x Mo Pmt (Form 22 Means Test tab)
c. Are any previously current liens now in arrears?  Document this (Creditor tab and Form 22 Means Test tab)

4. Form 7. Statement of Financial Affairs

a. Line 3. Payments to Creditors
b. The dates and payments to creditors will need to be updated, as well as the Amt. Still Owing

5. Re-Balancing Schedule I and &, and updating the Chapter 13 Plan

a. Because you are inserting new income information, it is possible that Schedules I & J need to be rebalanced, or that the Chapter 13 Plan (in a 13) needs to be re-calculated due to the change

Below are some TIPS on avoiding and handling expired bankruptcy petitions:

* Remind attorney a week before the end of the month that the Means Test will be expiring, so that he/she has the opportunity to address the situation

* If you end up needing to refresh an expired bankruptcy petition, you should charge for your time, as you had already done the initial work, and the circumstances surrounding why the petition expired are likely not under your control, so repeating this work is something you should be paid for.

* When entering income into the Means Test, I recommend entering the income for each month separately, if your software program allows for it.  This makes it a lot easier to refresh a petition when all you have to do is add the new month of income as the last month rolls off.  This saves you the time of averaging the income by allowing the software to do this work for you.

– by Victoria Ring, Colorado Bankruptcy Training

I worked on a bankruptcy petition this week that involved a couple who had worked at the same job for 25 years.  They owned no real property and no unexempt personal property.  Their credit card debts totaled only $33,000 and they owned 2 older cars with very low market values.

What would be your first question when faced with a bankruptcy petition like this?

Your first question should be:  Why are these people filing bankruptcy? There has been no change in their income; they own very little and owe very little debt.  Something is missing from the puzzle and before I could go any further I had to find out what it was.

I immediately contacted the attorney by email as well as a voice mail (never totally rely on email) about the problem.  He called the debtors and found out that one of the reasons for the additional expenses was that their son graduated from college and they were paying back his student loans.

This is a typical example of an INSIDER DEBT in bankruptcy!  Learn how to recognize these and you will help to prevent fraud.

Although the debtors I prepared the petition for were probably honest people, many people could say that they are making the student loan debt for their son, when in actuality the son is making the payment and the debtor’s are pocketing the extra cash.  Creditors look for loop holes like this and this is a typical example of why bankruptcy cases are held up in court for many months.

Think about this: Typically, it is the son’s responsibility to pay the student loan debt.  Even if the debtors produce proof of payment that they actually paid the student loan payment, it would be impossible to prove that the son did not give them the cash to reimburse the payment they made.  This would give the debtors extra money each month to spend that the creditors would prefer to have.

Keep learning, take care and have a wonderful week!

– by Victoria Ring

Clay Holland is really busy this week putting together the TWO DAY Atlanta Bankruptcy Seminars so I thought I would catch you up on my week.

ATLANTA SEMINAR?

Yes, Clay is finalizing the date and then he will make the announcement.  Stay tuned for more details from Clay a little later.

CHARLOMA BANKS

February 15 and 16 I spent training Charloma Banks.  Charloma lives in Plymouth Virginia and it was her first trip to Colorado.  Charloma had taken the time to do a great deal of studying on her own prior to coming for her training.  The first day was spent addressing the questions she had regarding the materials and reviewing a variety of techniques for developing a website.

After returning to her hotel room, Charloma spent most of the evening redesigning her website to reflect the new marketing information she learned.  When I picked up Charloma the second day for her training, I was impressed with the extra effort she put forth.  We then spent several hours rewriting and revising the wording so that it was more informative.  As Charloma learned, your website should be YOUR BEST.  It can be compared with putting on a tuxedo or a 3-piece business suit and attending a governmental social gathering.  That is how good your website should look in order to attract good business.

SUZIE MCKENZIE

Suzie McKenzie is really a cool chick.  She and a couple of friends jumped in their car, in Dallas Texas, and drove to Colorado Springs.  Although the normal drive time is 15 hours, Suzie and her friends left 4 days ago and stopped and vacationed along the way.  I trained Suzie and her friend on February 18 and 19.

Suzie has owned and operated her own advertising and publishing business for many years; but like the real estate industry, the publishing world is experiencing financial difficulty too.  It appears that right now, bankruptcy is about the ONLY growing field in America.

However, since Suzie has owned her own business for many years, there is no doubt that she will be ready to start working for attorneys within a short period of time.  Plus, Suzie has an outgoing and caring personality which is a perfect fit for working with clients in Chapter 7 and Chapter 13 bankruptcy.

NEW PRODUCT FOR ATTORNEYS

I am presently in the final development stages of a new product for attorneys called:  PRE-QUALIFY INTAKE FORM.  This is a four-page questionnaire, consisting of mostly YES and NO questions.  This makes it easy for the client to fill out in less than 5 minutes while at the attorneys office.

Using the accompanying INTERPRETATION TOOL, the attorney will quickly learn how to glance down the PRE-QUALIFY INTAKE FORM and get a good, general idea as to the complexity of this case.  This information will allow the attorney to make the determination whether to accept the case or how much of a fee to charge.  The more complex the case, the higher the fee.

As soon as the product is available for sale I will announce it to my PERSONAL LinkedIn Group.  If you are not subscribed to my LinkedIn Group, visit:
http://www.linkedin.com/in/coloradovictoria
and click on ADD VICTORIA RING TO YOUR NETWORK (upper right)

WATCH FOR CLAY HOLLANDS EMAIL ABOUT THE SEMINAR TO ARRIVE SOON

Photo and article at:
http://www.713training.com/clayholland.html

Please update your contact information for 713Training.Com to:

713Training.Com
PO Box 786
American Fork UT 84003-0786
Toll Free: 800-535-9984
Email: clay@713training.com

I am happy to report that both 713Training and 713Attorney have grown so rapidly that I had to separate them.  Clay Holland has been selected as the new Operations Manager for 713Training, which provides training and support to Virtual Bankruptcy Assistants and I will directing my efforts toward attorneys and their law firms.

I chose to work solely with the training and support of debtor bankruptcy law firms because one attorney, if properly trained in the Chapter 7 and Chapter 13 process, will benefit the lives of thousands of debtors over his or her career.

Additionally, the debtor side of bankruptcy law is growing at such an alarming rate that new attorneys require immediate training.  It is impossible for me to continue to run both 713Training and 713Attorney as a one person operation.  Therefore, to better serve both the VBAs and the Bankruptcy Attorneys, I have chosen this method to provide both markets with the ongoing training tools they require.

Why did I choose Clay Holland?  Because I personally trained Clay in the preparation of bankruptcy petitions and Clay took that knowledge and grew a very successful VBA business in 3 or 4 months.  He also has invested a great deal of time in helping an attorney in Salt Lake City build his practice, and has achieved even more success and knowledge in this field.  There is no doubt in my mind that Clay has the skills to continue the development of new training products for the VBAs and to be able to provide them with ongoing support.  And because Clay is working as a VBA every day, he will have more insight than I have because I rarely do petitions any more (except for complicated Chapter 13s).  For this reason Clay Holland was chosen to take 713Training to the next level and be better able to serve the growing needs of the VBA industry.

For more information about Clay Holland, visit:
http://www.713training.com/clayholland.html

Join me in welcoming Clay Holland as the new Operations Manager. To send him an email of congratulations, use: clay@713training.com

Victoria Ring
developer of 713Training.Com