Anyway, as for the law, under Section 1930(a) of Title 28 of the United States Code, a debtor whose income is less than 150% of the federal poverty level may ask the bankruptcy court to waive the filing fees in a Chapter 7 bankruptcy case.

You can find the federal poverty guidelines for 2011 by following this link:

http://aspe.hhs.gov/poverty/11poverty.shtml

The poverty level for those living in the contiguous 48 states is currently $10,890. It is a bit higher in Alaska and Hawaii. So, if your annual income is less than roughly $15,000, the court will allow you to waive the filing fee for bankruptcy which is currently $299.00. The other option is to pay the filing fee in installments. You can use that method whether you file a chapter 13 or 7. My preference and recommendation is that you do not pay the filing fee in installments because honestly, it is just another thing to forget to do. Especially in a chapter 13 filing where you have to start making payments to the chapter 13 trustee within 30 days of filing your case, paying the filing fee in installments is one of those things that if you miss making the payments, there is a good chance your case will be dismissed. Of course, sometimes it is hard to raise $300 for a quick filing if you are being garnished or your home is in foreclosure.

In those cases, sure, you can take advantage of the installment method to pay your filing fee and it might be a good idea to take advantage of that method. When a case if filed requesting filing fee installments, you select the method of payment.

The only rule appears to be that you have to pay all installments within 120 days of filing. We usually suggest to clients that they pay something when the case is filed, even if it is $50.00. We are here to help you so give us a call at 303-830-3545 in metro Denver.  We can also meet you at one of our branch offices throughout the state if you do not live in metro Denver.

With a chapter 13, you stay in control of your future.  Not only can you amend your chapter 13 plan (and payout to your creditors) but at any time you an dismiss your case.  Why? Because you have the absolute right to dismiss your case anytime you wish.

But back to chapter 7 for a minute.  When you file chapter 7, the trustee owns everything you own.  And if you made any weird transactions or conveyances prior to your filing, the trustee can start suing the transferees, that is, the people or businesses you transferred property to, in order to return it to your your bankrutpcy estate for the benefit of creditors.

With a chapter 13,  you can modify car payments, assuming the LOAN, not the car, is more than 30 months old.  Also, you can strip off a second mortgage if your house is worth MORE than the loan balance on your FIRST mortgage.  Also, you can file a chapter 13 for as little as $274 and you can pay your lawyer through the plan, if that is the agreement.

So the bottom line is yes, I love chapter 13s, because they offer you so much more in terms of control and flexibility.  And yes, you are required to pay all of your creditors something, but I have designed plans where the payments were as low as $125 per month, and that covers everything, including attorney fees.  So before you jump into a chapter 7, consider chapter 13.  And make sure the lawyer you select has filed a chapter 13 before.  Many lawyers only file chapters 7, because they do not understand the fine details pertaining to chapter 13.

For example, one exemption is tools of the trade.  That is, items you use in your business.  Say you sell real estate.  You are a professional realtor.  For your business, you need a car, computer, business cards, yard signs, and so forth.  Well, the exemption is $20,000.  That means, if you are a realtor and you need to file bankruptcy, you can keep $20,000.00 in business assets.  I have represented lawyers, doctors, realtors, plumbers, coffeeshop owners and all self employed persons get to keep $20,000 in business equipment or tools of his or her trade.

There is a long list of exemptions.  My favorite is retirement accounts.  There you keep 100% of your retirement accounts.  I once represented a railroad brakeman.  He had close to $1,000,000 in his retirement account.  The trustee was not happy, but this client was entitled to keep every penny of it ~ legally.

The car exemption is $5,000.00.  What if you have 3 cars?  It is my position that as long as they all are worth less than $5,000 you can keep all cars.  What if the vehicle is worth $5,500?  Will you lose the car?  Unlikely.  The trustee will probably just let you keep it.  If the trustee were to sell it, the sale costs could approach $500 or 10% so the trustee will only net $5,000, which is your money.  At worst, the trustee could demand that you pay him or her $500.00.

There are some things that are NOT exempt.  The biggest one is cash.  And no, you cannot hide it under your mattress!  It is still cash.  Most courts will NOT object to some exemption planning.  So we can help you shelter any cash assets that are not in a protected retirement account.

Remember, the chapter 7 trustee gets a commission based on what he/she collects.  So the trustee wants to collect as much money from you as possible.  Most trustees are reasonable and will not open an “asset” case unless the value of the non exempt assets exceeds $1,500.00.

The exemptions are all doubled up assuming you are married.  For example, a family will get a car exemption of $10,000 in Colorado.  And this is after any car loans.  For example, you can own a $100,000 Mercedes.  As long as the loan against it is at least $90,000, leaving $10,000, the car is safe.

The only exception to this rule is real estate.  Your homestead.  Where you live.  In this case, the homestead exemption attaches to the house, not the owner.  In Colorado, the exemption is $60,000.00.  Thus, if you home is worth $250,000, but it has a $190,000 mortgage loan against it, you get to keep it.  If you are over 60 years old, the homestead exemption is $90,000.00.

When you meet with your bankruptcy lawyer, make sure you get a copy of the Colorado exemptions list.  We discuss all the exemptions carefully with you when we meet.  If you want a free copy of the exemptions, send me a personal email at johncimino2003@aol.com or ciminolawoffices@gmail.com.  Remember, this is for a Colorado bankruptcy only.  Not for any other state since each state has its own exemptions.

Roughly, if you are single and earn more than $50,000 per year, you are looking at a chapter 13.  The number changes based on number of dependants and other factors and is not the main point of this posting.  The point of my post today is to discuss the impact of making withdrawals from your IRA or other retirement account.

Let’s say you have not worked in 10 months.  You have had zero income wages.  However, you saved $100,000 over the last 20 years.  Let’s assume that you also receive maintainance of $2,500 per month.  Roughly, you have received a total of $15,000 in the last six months.  So far so good?  Probably.  What if you needed to withdraw $15,000 from your IRA to buy a new car, catch up on house payments and get the utilities caught up.  Problem?  Well, unfortunately, the IRA distribution can be taxable not only for federal income tax purposes (which is beyond the scope of this post) BUT ALSO it will land on your B22c form as additional income!  As a result, guess what?  You got it: you now flunk the means test because according to the numbers, you “earned” too much money in the last six months and now you have to file a chapter 13 bankruptcy!

There are ways around this mess and a competent bankruptcy lawyer will be able to explain the “loopholes.”  (I would post them here, but too many lawyers read my blog to learn my tricks.)  So call me!

The chapter 7 first meeting of creditors is much different than the chapter 13 first meeting of creditors. This is because the duties of the trustee in 7 world vs. 13 world are so different. In chapter 7 world, the trustee’s job is to collectd and liquidate assets owned you, transferred by you or OWED to you. For example, if you are entitled to receive an income tax refund, the trustee can take it from you. If you have $506 (just an example!) in your bank account, the chapter 7 trustee owns the money. Basically, in chapter 7 world, the minute you file bankruptcy it is like you have died financially, and the chapter 7 trustee is required to collect any of your assets that are NOT exempt. For example, if you have cash on hand when you file or bank accounts or valuable jewelry, to name a few examples, the chapter 7 trustee is required to collect those assets for the benefit of creditors. In some ways, chapter 7 is very dangerous.

On the other hand, the chapter 13 is less concerned about what you own, and more concerned about your ability to make future payments to your creditors through her office via your proposed chapter 13 plan.

When you go to your 341 meeting, you will be asked to raise your right hand and swear that you will tell the truth. You must bring your ID and social security card. If you forget, the meeting will need to continue your meeting to another time so you can bring proper ID so the trustee can make sure you are the person who filed the bankruptcy. The trustee will then ask you a series of questions including whether or not you signed the papers and whether you have listed all your assets and debts. The entire process takes about 15 minutes and we, as your lawyers, go with you and make sure you are properly represented. If your case is complicateed, the first meeting can take much longer than 15 minutes. Because most trustees get 5 to 8 cases every half hour, you can imagine that the trustee does not have a lot of time to spend on your individual case. Hopefully, if your lawyer properly prepared your case, things should go smoothly.

Then there is the lawyer who charged $25,000 for a simple chapter 7. No way you say? Yes, way. Some lawyers need to hit up that rare client that comes through their doors, since they do not know when their next victim will appear. So cost can be a mysterious thing. The truth is, most lawyers will charge around $1,500 for a basic chapter 7 and the filing fee is another $299.00. Sometimes, we will roll the filing fee into the total fee, which means the attorney fees is $1,201.00. So the BEST lawyer regarding cost is the one who is clear on the fee, does not post false ads on the internet and who does not gouge you with exorbitant fees.

What about Experience? This really has to be tops on my list. There are many young lawyers who are trying to break into the field who simply do not have the experience to represent you. Bankruptcy law is not one of those areas where you just watch the video the night before. One needs to be familiar with tax law, secured transactions, fraudulent conveyances, valuations, preference law and motion practice to name a few pitfalls. When you interview lawyers, just ask how many years they have practiced bankruptcy law. I have practiced bankruptcy law for OVER 30 years. I was a chapter 7 trustee for close to 15 years and have administered thousands of cases.

How do you Communicate with your lawyer? Let’s face it, we cannot get along with everyone. My paralegal loves her dentist. For me, I don’t care much about my dentist as long as she does not cause me too much pain. I am not saying you need to jump up and down when your lawyer walks in the room, but you have to be comfortable with your lawyer and be able to communicate with him or her. If you cannot connect, communicate or understand what your lawyer is telling you, keep searching.

Does the lawyer have a support staff and more importantly, how do they treat you? I have heard horror stories about how other offices treat clients who end up not hiring that firm and come to my office. Suffice it to say, if you are not treated well by a law office staff, run the other way.

So the best bankruptcy lawyer is the person who does not gouge you and is truthful about the cost of bankruptcy. He must have decent experience AND be able to communicate with you. And the office staff needs to treat you politely and with respect. Agree?

The other cost to file is the cost of the credit counseling classes, the before and after class. The program we recommend is found at our website or you can use this link, www.Abacuscc.org. We have a class that says it is free, but at the end of the program, it asks that you make a minimum donation of $5.00 to its operating fund.

After the case is filed, whether or not you have gone to court yet, you must take the second class. This second class is called “debtor education.” There are many providers and we found one that charges only $8.95 for a single person and $12.95 for a married couple.

The other cost that one must consider is the attorney fee price. This is where things get weird. First, beware the low ball bait and switch scam. Unfortunately, there some lawyers who will offer a chapter 7 for $499, but when you get to the office, you learn that this is just a bait and switch. In fact, there is no $499, it was just a fake ad to entice you to come to their office. You know who these creeps are because they use black hat methods to advertise on Google.com.

The reality is that the attorney fee for chapter 7 ranges from $1,000 to $25,000.00. Yes, in one recent case, a lawyer charged a client $25,000 for a chapter 7! The average attorney cost for a chapter 7 is $2,000, plus the filing fee of $299.00. Some chapter 7 lawyers will charge around $1,500 and some will include the filing fee in that price, so the actual cost for the attorney will be $1,201.00 ($1,500 minus the $299.00). We try to keep our fee around $1,500 but ask the client to pay the filing fee of $299.00. We can keep our fees low because we are located near the court house and file several cases at a time. Some lawyers only file one or two cases a month, hence, they need to charge you more money.

With regard to chapter 13, the average fee is $3,300.00. There is a simple reason too. The court will allow chapter 13 lawyers to charge a flat fee of $3,300 and not require the lawyer to file what is known as a long fee application. If the charge is one dollar over $3,300, say, $3,301, then the lawyer must file a long fee application, which means that the lawyer must track evey minute of their time. Tracking time is a pain, quite bluntly, so we try to keep our time within the $3,300 range. Obviously, some cases require timekeeping, for example, business or other complicated cases. Again, because we are the top chapter 13 filer in the state, we are able to better manage our costs and time to keep pricing reasonable for, the consumer.

We make you this offer: If you bring us a bona fide fee agreement from another attorney, we will beat that price by $100.00. Happy shopping!