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Appeals Court: Debtors must be income eligible to convert from Ch. 13 to Ch. 7

When a federal appeals court recently ruled that Chapter 13 debtors must meet the income eligibility requirements of section 707(b) before their case be converted to a Chapter 7, it joined an increasing chorus of cases with similar holdings. However, the court left an important question unanswered: Which six months of look-back income will the Court require for the purposes of calculating the debtor’s Means Test?

In the consolidated appeal of two Iowa and Minnesota cases, In re Chapman and In re Cruse, Nos. 10-6046 and 10-6047 (8th Cir. BAP Mar. 11, 2011), the debtors had filed a Chapter 13 after the 2005 Bankruptcy Reform Act was enacted. However, a change of circumstances, they converted their chapter 13 cases to chapter 7s, requesting a discharge of their debts prior to the completion of their respective chapter 13 plans. The U.S. Trustee objected, arguing that based on the income they claimed to earn in their chapter 13 plans, they could afford to repay at least part of their debts.  The debtors countered that section 707(b) of the U.S. Bankruptcy Code governing the Means Test only applied when debtors initiated their cases as chapter 7s, not when cases were converted to chapter 7s from chapter 13 filings. Further, they contended that since their changed circumstances inhibited their ability to continue paying into their chapter 13 plans, they should not be subject to the Means Test.  The bankruptcy courts agreed with the debtors, ruling that section 707(b) only applied to cases originally filed as chapter 7s, not conversions. The U.S. Trustee appealed, and the bankruptcy appellate panel ordered the two cases consolidated for the appeal.  In ruling against the debtors, the appeals court held that under long-standing Eighth Circuit federal appeals court precedent, the term “conversion to chapter 7” is synonymous with “filed under chapter 7.” However, since the appeals court did not address the income look-back requirement of section 707(b), future litigation on the matter is likely.

To discuss your bankruptcy matter with a Texas Bankruptcy Lawyer to determine whether you qualify for a Chapter 7 bankruptcy, please call us toll free at 877.345.6767 (DFW area), 866.715.1529 (Houston area) or 866.678.1900 (South Texas).

We provide affordable payment plans for fees. For additional information about personal bankruptcy, please visit our Personal 7 Bankruptcy Information page as well as our General Bankruptcy Information page.

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Understanding bankruptcy’s automatic stay

When individuals or businesses file bankruptcy, something invisible yet incredibly resilient occurs. It serves to deflect the attempts by creditors and bill collectors to collect money owed by a debtor for services rendered or goods received.

An important aspect of bankruptcy law is known as the ‘automatic stay.’ The ‘stay’ basically acts like Teflon against attempts to collect debts allegedly owed by a debtor. In the standard bankruptcy, the automatic stay remains in effect during the entire pendency of a bankruptcy. However, exceptions to that norm were enacted when Congress overhauled the U.S. Bankruptcy Code in 2005.

A major component of the Bankruptcy Abuse and Creditor Prevention Act of 2005, which served to overhaul the U.S. Bankruptcy Code, referred to automatic stays. As Congress contemplated how to tweak the laws about automatic stays, the general consensus was to write a law that would deter debtors from filing and dismissing a bankruptcy just to benefit from the protections afforded by the automatic stay.
So now, when a debtor files for bankruptcy, if it’s the first time that case was filed, the bankruptcy receives a complete automatic stay.

However, say a debtor (business or individual) filed for bankruptcy within the last year and the case was dismissed prior to discharge, whether that occurred because the debtor requested it or the court ordered it. If that case is refilled within a year, it will enjoy an automatic stay of 30 days.

If a debtor files and dismisses the same case several times, the case will not benefit from an automatic stay at all. Congress wanted to ensure that debtors are not abusing the privilege of the automatic stay, so it decided there are situations when a bankruptcy filing does not benefit from an automatic stay, at all.

Contact a Texas Bankruptcy Attorney – If you would like to obtain additional information about Texas bankruptcy, explore your options, learn about the bankruptcy process or discuss your particular situation with an experienced Texas Bankruptcy Attorney, please schedule a free initial consultation by calling us toll free at 877.345.6767 (Dallas – Fort Worth area), 866.715.1529 (Houston area) or 866.678.1900 (South Texas). If you prefer, you can also fill out our intake form and we contact you to schedule a consultation.

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I Can Understand Buying a Car Without A/C, But Not Without Turn Signals


This article may appear to be about the annoying people who change lanes and make turns without the courtesy and safety of using their turn signals. It’s not. It is about safety devices, designs and equipment that are found on consumer products.

Turn signals, seat belts, fire retardant children’™s pajamas, safety locks on guns and rifles, and shields and other protective covers are just a few of the safety devices, designs and equipment that consumers enjoy because of decades of litigation by trial lawyers on behalf of innocent victims. These safety devices, designs and equipment actually work when they are not tampered with, removed, circumvented or altered. So, if you buy a car with law-mandated safety equipment such as seat belts, why would you not use them? If you bought a table saw with a law mandated safety guard over the sharp, spinning blades, why would you remove? If you bought a gun with a safety lock, why would you not use it until ready to fire the gun? It is hard to understand, but many people do ignore safety devices, designs and equipment. Worse yet, these safety devices, designs and equipment are often tampered with, removed, circumvented or altered on a regular basis. Not only are all consumer protections lost at that point, but the ability to bring a lawsuit to recover for injuries and damages is severely impaired if not completely destroyed by such conduct. The consumer must respect not ignore – the warnings and safety devices, designs and equipment that are there for their protection.

Prescription drugs have safety devices, designs and equipment, too. Prescription drugs are dangerous and do have side effects, and need these safety devices, designs and equipment, called warnings. Warnings are contained in the œpackage insert that comes with the prescription either from the company or the pharmacists. Warnings work only when they are accurate, complete and adequate. Further, accurate, complete and adequate warnings work only when strictly followed: The drug must be taken as prescribed by the physician, and a prescription drug prescribed for one person must not be taken by someone else.

The drug companies must accurately and completely disclose all of a prescription drug’s dangerous side effects so the warnings accurately, completely and adequately warn the patient. Drug companies must also constantly update the warnings as new information is obtained. More times than not, however, the drug companies are not inclined to give accurate, complete and adequate warnings because more numerous and severe the warnings, the fewer prescriptions will be written for that drug. The prescribing physician will find a better, safer alternative drug that is equally effective without the same risks.

Litigation against the drug companies is based on inaccurate, incomplete and inadequate warnings, as well as manufacturing and design defects. The prescribing physician has the responsibility to discuss a prescription drug’s side effects with the patient, as well as the risk of those side effects and the benefits of the drug. It is only when the warnings that the physician has access to do not include all known dangerous side effects that a case exists against the drug companies. After all, we know all drugs have side effects. We as the patient have the absolute right to know what those side effects are so we can have that risk/benefit discussion with the physician and make the decision whether to take the drug. As a patient, we have the right to know what the drug company knows about their prescription drugs before we take it. After we take the dangerous drug and are injured by it, the questions becomes what did they know and when did they know it.

You can’t claim ignorance of the drug’s warnings any more than you can claim you bought the car without turn signals or that the seat belt is too uncomfortable to wear. All are safety devices that are there for your safety.

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