For Immediate Release- September 10, 2007
As Single Mom Cashes Out Retirement to Save Home and Goes from Victim to Accused, Busby & Associates Step Up Efforts to Educate Clients – Spotlight Flaws in Bankruptcy Legislation
HOUSTON – The impassioned attorneys of top Houston-based bankruptcy and family law firm Busby & Associates reaffirmed their stand to help educate clients and inform the public of vulnerabilities within the Bankruptcy Reform passed in Congress in 2005, following the case of a single Texas mother of three who went from victim to accused under the new legislation.
Learning that the recently separated mother of three children – hoping to reconcile with her estranged husband and cashing out her retirement of $11,000 in October of 2006 in order to address the arrears of her mortgage – lost her home and was forced to create a new situation with no spousal support, the firm turned their attention to her struggle and complications that ensued.
The attorneys of Busby & Associates explained that the single mother was unable to afford home rental and car payments without child support from her husband and opted to file a Chapter 7, a liquidation bankruptcy claim with the decision to surrender both her house and car.
Once filing the bankruptcy, the mother was audited, which is a routine procedure every 250 cases under bankruptcy law. As the audit progressed, a U.S. Trustee noticed the deposit from the dissolved retirement account and questioned the transaction unaware of its original intent.
“Under the Means Test, the inquiry of one seeking financial aid – and now Bankruptcy as a result of the new bankruptcy reform – must include the reporting of all income received in the six months prior to filing in order to determine the individual’s current monthly income,” said Busby & Associates partner Michael Busby, Jr.
“Unaware that a dissolved retirement intended to satisfy arrears of a mortgage months earlier would be defined as current income, the mother failed to report it. And that became the black hole into which she feel under this new reform,” Busby added.
Busby explained that as a result of the omission the auditor filed a report, Material Misstatement Identified, which was mailed to all of the young woman’s creditors. While none of the creditors objected to the discharge, the U.S. Trustee charged with ensuring compliance with the statute determined that abuse was present nonetheless.
And facing a motion to dismiss, the debtor opted to convert the case to a Chapter 13, a form of bankruptcy in which creditors receive some portion of the total amount due. Under this arrangement she attempted to pay creditor’s approximately $150 a month over a five-year period. Unfortunately, approximately half of the trustee payments are allocated to administrative costs and not the creditor – prolonging her obligation and unfortunate situation.
The hands-on attorneys of Busby & Associates are casting a spotlight on this legislation and questioning what Congress intended in the initial Bankruptcy Abuse and Consumer Protection Act of 2005. They have pledged to Houstonians to address the fallibility currently existent in the bankruptcy legislation and strengthen both the foundation under which clients stand and the tools required to navigate through the process.
Busby & Associates is a leading Houston-based consumer bankruptcy and family law firm that specializes in debt relief and bankruptcy cases. They are members of the National Association of Consumer Bankruptcy Attorneys. Log onto www.busby-lee.com or call (713) 974-1151 to find out how they can help you avoid a situation like this.
Contact: Michael G. Busby, Jr.
Busby & Associates
Attorneys & Counselors at Law, P.C.
6100 Corporate Drive Suite 190
Houston, Texas 77036
Tel: (713) 974-1151
Fax: (713) 974-1181