Massachusetts Personal Injury Bankruptcy Exemption

Here in Massachusetts, we can choose between the federal and state bankruptcy exemptions. Exemptions are laws that allow you to keep property you have when you file bankruptcy. A personal injury lawsuit is "property" that you will lose to a Chapter 7 bankruptcy trustee if it is not exempt. So, when are personal injury suits--for car accidents, slip and falls, etc.--exempt?

It's fairly simple: There is no Massachusetts exemption for injury awards in bankruptcy, but since we have the right to choose exemptions under federal law, we have the following:

Effective April, 2010, the federal personal injury bankruptcy exemption is $21,625 for "personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent."

There are various complications when it comes to exempting personal property awards in bankruptcy, mainly involving liens. Seek out experienced bankruptcy counsel if you wish to attempt to exempt an injury suit.

Payment Plans in Chapter 13 Bankruptcy

I previously wrote about payment plans in Chapter 7 Bankruptcy, and now I'm going to explain a bit about Chapter 13 payment plans. Chapter 13 payment plans are the same as Chapter 7 payment plans with one important difference. A bankruptcy attorney can accept payment from you after a Chapter 13 case is filed if the money comes from your Court-ordered Chapter 13 payment.

Here's a key point: Total Chapter 13 bankruptcy fees are generally $4,000 ($3,500 plus $500) here in Massachusetts because of a Court rule (you can read the Court rule here--this link will open a large PDF document on the Court website and the rule is on pages 83 and 84). Virtually all bankruptcy lawyers in Massachusetts charge this amount for a standard Chapter 13 case because of the rule. However, the key is this: the amount you pay out of your pocket varies. Lawyers who do a lot of Chapter 13 will sometimes only take part of the $4,000 upfront and let the rest be paid via your plan. This is good for you because the remainder that your lawyer collects normally just reduces the money that your creditors get without requiring that you pay more. We will sometimes charge people as little as $1,750 before a case is filed (which itself can be paid via a payment plan in the Chapter 7 style) and take the rest via their Court payment.

Contact us if you'd like to discuss your bankruptcy options in Massachusetts.

Another question you might have: How is my Chapter 13 payment determined?

Payment Plans in Chapter 7 Bankruptcy

Some bankruptcy attorneys hide the ball when it comes to the true cost of bankruptcy. We do not and you can get some real numbers about bankruptcy fees in Massachusetts on our website. However, I wanted to write here about payment plans. My experience is that more than half of consumers these days do not have sufficient funds to pay for bankruptcy upfront and need a payment plan. We work with people in this situation every day and offer payment plans that are clear and honest manner--but they work differently in the different chapters of bankruptcy.

Chapter 7 Bankruptcy Payment Plans
The key with payment plans for Chapter 7 cases are that all fees and costs must be paid before the case is filed. At first glance, this may disappoint you, but for 99-plus percent of people it's not a problem. There are a couple of factors to keep in mind.

• First, this is the only legal way to offer a Chapter 7 payment plan. If an attorney extends a payment plan into the period after a Chapter 7 is filed, he or she is breaking the law. This is because unpaid, pre-filing fees cannot be collected after a Chapter 7 case is filed due to the automatic stay. Any bankruptcy lawyer who would consider offering an illegal payment plan is either ignorant about basic bankruptcy law or is playing fast and loose with the rules. You do not want this. In general, the Court will not excuse you from the law just because you were following the advice of an unethical lawyer.
• Second--and this is key--the payment plan period usually overlaps with the pre-filing process. In other words, you and your lawyer need time to prepare your case for a successful filing. This work is done along side the payment plan. Once the payments are made and the work is completed, the case is filed. One extra thing we provide is a service to handle creditor phone calls while you are in the pre-filing process. This makes the payment plan process comfortable by giving you some breathing room. Ask about this if you decide to call us.

For my next installment in this two-part series, I will explain how payment plan work in Chapter 13 bankruptcy. You can read more about us and Massachusetts bankruptcy in general here.

Charged Off, Zombie Debts and Bankruptcy

Someone recently wrote me and asked whether he had to pay a debt that was charged off years ago and sold to a debt collector. Of course, the answer is it depends, but this is what it depends on. The key points:

1. The tough news is that after a debt is charged off, you still owe it. Charging off a debt is an accounting practice meant to give a fair picture of the value of a business (by taking bad debt off its books). Charging off an account does not affect the legal obligation to pay it, and the business must account for money they earn once they sell the debt to a debt buyer to collect the defaulted debt. Often there will be a gap between when the debt is charged off and when a debt buyer emerges to contact you for payment. This is where the "zombie debt" term comes in, i.e. you think the debt is dead, but then it resurrects and attacks you.

2. The (possible) good news is that the gap is sometimes too long, and the debt too old, to make it collectible in court. Just because a debt is sold to a zombie debt buyer, it doesn't mean that the statute of limitations is revived if it already has lapsed. Generally, the statute if limitations in Massachusetts for debt collection is six years from the date of the original default. If you make any partial payments later, this will usually re-start the clock, but if you don't the six-year rule usually applies.

3. If the debt is still good once it's in the hands of a debt buyer, you must pay it, settle it, or file bankruptcy. We specialize in affordably accomplishing the last two options for Massachusetts consumers and small to medium-sized businesses. Give us a call or send us an email if you would like our help with your debt problem.

Threats During Car Repossession

I have written about the special Massachusetts rule against trespass during vehicle repossession, but I wanted to say something about threats. When there is a confrontation during a repossession attempt two things are almost always true: (1) there's a trespass and (2) the repo agent makes threats. I see the threats as fitting in two categories: (1) threats against financial interests and (2) threats of violence against persons or property. Although the first type of threat can sometimes be actionable in a court of law, it is the second type of threat that almost always constitutes a breach of peace and creates the entitlement to the sometimes-sizable breach of peace damages.

*Note: If your car has been repossessed in Massachusetts, we might be able to help. However, due to high call volume after I posted information here about Massachusetts car repossession, we must first receive the completed form found here. We will review your matter confidentially and free of charge.

Massachusetts Repossession and High Interest Car Loans

As I have written elsewhere on this blog, the minimum damages under the Massachusetts Commercial Code for a breach of peace during a car repossession are the finance charge for the loan plus 10 percent of the amount of the total loan. When repo agent comes onto your property without your permission and demands and takes your car over your strong objections, you likely have a breach of peace. We get emails all of the time from people with this situation. Often these people are just looking for information and some assurance that the law has been broken. I really do not know why. This knowledge means nothing by itself. Laws do not enforce themselves.

If you've been subject to a car repossession involving a breach of peace, here's the smart thing to do: submit this form to tell us your story. However, the point of the form is to see if you have a good case, and if you do, to bring a lawsuit for wrongful repossession. There are two key points to keep in mind about this:

1. If you do not sue, you will likely be pursued for a car repossession deficiency debt. If the balance of your loan is more than $2,000 when the repossession occurs, you are liable for any deficiency debt.

2. If you do sue, you can likely wipe out the deficiency debt. Moreover, if there is a breach of peace you can recover the minimum damages (noted above). For a high interest car loan, this sum can be substantial. For example, we now have a case involving a $30,000 car loan at a 14 percent interest rate. The car was repossessed. If we are able to show that a breach of peace occurred, the consumer will be entitled to almost $18,000. There are most likely thousands of consumers who unwittingly are entitled to substantial damages based on a wrongful car repossession in Massachusetts.

Bottom line: If you have a case, pursue it diligently. It can mean the difference between you paying money and getting paid money.

Notes:

* We do not charge you fees. If we agree to take your case, we get paid from the proceeds of settlement or judgment.

* Just coming onto your property without your permission to take the car when you are behind on the loan is usually not enough. To be a good case, normally there must be a confrontation of some sort on your property.

The Dave Ramsey Mistake

Recently I received a call from a woman in her 70s seeking information about bankruptcy. This woman, a widow, had tried just about everything to deal with her debts: credit counselors, direct negotiations with creditors, and drawing down her savings to keep up with payments. With that savings quickly approaching zero, she finally reached out to a attorney to explore bankruptcy.

I've always had a soft spot for older people with debt problems. They often take it very hard, perhaps because they come from a generation where debt problems and bankruptcy were more stigmatized. So, we spoke about her options. Given her low income and meager assets, she qualified easily for Chapter 7, which would result in a discharge of about $40,000 in consumer and medical debt. However, our conversation wasn't just about money. She told of me of her great emotional reluctance to file bankruptcy. Only one inescapable fact made her consider it at all, that she would soon have nothing left and be unable to even eat without some serious debt relief. Then she mentioned that she listened to the Dave Ramsey radio show.

I don't really listen to Dave Ramsey, but I've seen him on TV a few of times, and I am familiar with his message. Mr. Ramsey is well known as a fierce anti-bankruptcy crusader despite famously filing bankruptcy himself several years ago and discharging about $4,000,000 in debt. Despite this small mercy that allowed him to move on with his life, he now counsels people to avoid bankruptcy at all costs and does everything he can to re-stigmatize the process.

Behind the scaremongering, Mr. Ramsey's makes two basic wrong points. His first avenue of attack is that bankruptcy damages credit. Bankruptcy does damage credit for several years. However, the simply truth is that people considering bankruptcy already have or shortly will have severely damaged credit. Not paying debts on time severely damaged credit. When this is inevitable, very little additional damage is done by filing bankruptcy. In fact, bankruptcy can even clean up the cluster bomb of multiple debt defaults by replacing the credit balances on a report with zeros. In any event, a Google search of "credit after bankruptcy" will quickly illuminate the well-trod path to rebuilding credit after bankruptcy--something that is not an option while you're still mired in debt.

The second avenue of attack is more insidious. Mr. Ramsey lays it on thick about the psychological cost of bankruptcy, comparing it to the death of a loved one and having the nerve to suggest that it might be one of the worst experiences of your life. This is just insane. I've been practicing bankruptcy law since 2002 and I can say without any reservation that the reverse is true. People are so relieved after getting a debt discharge after struggling with it for so long. Permission to move on with your life is freeing and cathartic. By way of an example, check out this message board I found tonight discussing Dave Ramsey and people's real experiences with bankruptcy. You can also read my site to read about people's experiences with us and the bankruptcy process.

The truth is that Mr. Ramsey did what many rational and intelligent people do when faced with an insurmountable debt problem: He sought refuge in the legal system created to help him. Counseling people to do otherwise is irresponsible. I usually don't mind anti-bankruptcy posturing, but when it affects someone in their 70s, it does bother me. I say live what life you have left for yourself and your family, and not for the credit card companies. The credit card companies--the beneficiaries of Mr. Ramsey's rhetoric--can take care of themselves and have had plenty of influence on the bankruptcy laws on the books today. One should pay their debts if they can, but if someone simply cannot pay and qualifies for bankruptcy, they are doing themselves and their family a great disservice by not taking the help that the law provides.