June 26, 2017

Bankruptcy Exemptions: Tools of the Trade

When filing for bankruptcy, a consumer is afforded numerous exemptions, or laws that protect a person’s property. These exemptions help to protect a homestead, livestock, household goods and furnishings, vehicles, and other property.  There is an exemption that protects tools of the trade as well.  This post will detail the tools of the trade exemption, and what constitutes “tools of the trade.”

Broadly speaking, tools of the trade relate to books, implements, and tools related to a person’s trade or vocation.  For example, a mechanic has power tools, air compressors, and the like; a woodworker, may have a lathe, router, electric saws, books on woodworking techniques, and so on.  All of these “tools of the trade” are covered by the tools of the trade exemption.  Other tools of the trade, depending on a person’s vocation or trade, may include: equipment, machinery and tools, books and trade libraries, specialized furniture, vehicles, animals, and so on.

Depending on which exemption scheme you may choose, a person filing bankruptcy in Oregon may choose the Oregon Tools of the Trade Exemption or the Federal Tools of the Trade Exemption.

1. Oregon Tools of the Trade Exemption – ORS 18.345:   The Oregon Tools of the Trade Exemption is defined as “The tools, implements, apparatus, team, harness or library, necessary to enable the judgment debtor to carry on the trade, occupation or profession by which the judgment debtor habitually earns a living, to the value of $5,000.”  The Oregon Tools of the Trade Exemption is a bit more than the Federal Tools of the Trade Exemption; however, usually applying the Federal exemption has more beneficial results as a person also has a wild card exemption that can also be applied to tools of the trade.

2.  Federal Tools of the Trade Exemption – 11 USC 522:  The Federal Tools of the Trade Exemption applies to a debtor’s aggregate interest, not to exceed $2,300 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.

The Federal Wild Card exemptions can also be used in conjunction with the Federal Tools of the Trade Exemption, which, when used together, can protect over $14,000 in tools of the trade.  In most instances, it makes better sense to use Federal Exemptions, despite the fact that the tools of the trade exemption is less in the Federal exemption scheme than it is in the Oregon exemption scheme because of the wildcard exemption.

If you would like to learn more about bankruptcy and how bankrutpcy may benefit your financial situation, please contact me today for your free bankrutpcy consultation.

Don’t Pay Mom or Dad Back! File Bankruptcy First!

Outside the context of bankruptcy, this is a very strange notion: don’t pay Mom or Dad back – file bankruptcy first. But this has some very real world consequences. I usually see an uptick in people paying back their relatives around tax season, when people get their tax refunds. But this could prove potentially disastrous if you are planning on filing a bankruptcy.

Why is this? Well, it all comes down to preference payments to an “insider.” An insider can be a friend, relative, or even business associates in some situations. And the bankruptcy code does not necessarily look kindly on repayment to these folks within a year of a person filing bankruptcy. The bankruptcy code, in all fairness, tries to even the playing field for all creditors.

For example, if you pay Mom and Dad back during the past year, especially at the expense of other creditors, these payments can be “clawed back” by the bankruptcy trustee, or the person who administers your bankruptcy. These payments usually need to be substantial enough for the trustee to pursue; usually repayment of debt to family members that are minimal do not raise the trustee’s eyebrow. However, the more money you repay a family member or friend, within a year of your bankruptcy, the more exposure you create: the trustee can go after that family member or friend to recover the monies you paid, as a preference payment – and the trustee has every right to pursue these payments under the law.

So, if you have been paying Mom or Dad on a debt and you are considering bankruptcy, what do you do? Immediately make an appointment to see a bankruptcy attorney – such as myself. Second, stop paying the family member immediately to mitigate any exposure. After your bankruptcy, you can repay anyone you want to, including friends or family. The issue is when you pay friends or family back before you file bankruptcy.*

In certain circumstances, when a client comes to see me and I learn that a substantial amount was paid back to a parent or relative within the last several months, there are a few things we can do. First, we can undue the transaction – have the parent or relative return the funds (check form is usually best for record-keeping). Or, wait a full year for the preference period to run (the bankruptcy code only allows a 1 year look-back; therefore if you paid Mom $5,000 on a debt 13 months ago, this does not fall within the 1 year period in which the bankruptcy trustee can claw back the payment as a transfer to an “insider”).

In any event, you should meet with a bankruptcy attorney immediately and discuss what options are available.

I conveniently offer free in-office consultations in Eugene or by phone. Please feel free to contact me today to schedule your free bankruptcy appointment to learn how bankruptcy may benefit your financial situation. And if you have been paying back an “insider” during the past year, we can discuss ways to mitigate any consequences.

I look forward to hearing from you.

* If Mom or Dad hold a security interest in a vehicle, and you are making normal payments on this vehicle to Mom and Dad – this is not a preference payment. Most preference payments apply to unsecured debt, or debt not attached to collateral.

Divorce Debts & Bankruptcy: What is Covered & What is Not

Certain divorce debts are non-dischargeable in bankruptcy, meaning they do not go away. Other divorce debts may be dischargeable in bankruptcy. This posts details how bankruptcy and debts related to divorce interact.

CHAPTER 7 BANKRUPTCY & DIVORCE DEBTS

A chapter 7 bankruptcy, or a “liquidation” bankruptcy, has little effect on divorce debts. Virtually all obligations owed to the ex-spouse are not covered by a chapter 7 bankruptcy, particularly any spousal or child support. Now, if a consumer incurred legal fees for that consumer’s legal representation (i.e., you owe your divorce attorney $5,000 for representation in a divorce), these fees are dischargeable in a chapter 7 bankruptcy. But little else relating to divorce debts, particularly spousal support or child support, are dischargeable in a chapter 7 bankruptcy.

Where it gets a bit tricky is any debt-assignment pursuant to a divorce decree and chapter 7 bankruptcy. For example, let’s say you have a Chase credit card that was jointly held with your ex-spouse for $10,000. In the divorce decree, you agreed to pay this debt solely. Now, 1 year later you file a chapter 7 bankruptcy. Chase will recognize the bankruptcy, and will not attempt to collect the debt from you. However, your former spouse is on the card as well, so Chase will go after the former spouse. BUT, in the divorce decree you said you would take care of this debt – what now? If the ex-spouse ends up paying for the Chase credit card, despite the fact that in the divorce decree you indicated you would pay it, the ex-spouse can come after you for recoupment, or the amount he had to pay on the card. Sometimes, however, when one former spouse files a bankruptcy, the other former spouse will file bankruptcy shortly after, making the above situation moot.

CHAPTER 13 BANKRUPTCY & DIVORCE DEBTS

How does this same situation play out in a Chapter 13 bankruptcy? If there is a debt-assignment, whereby one spouse takes on responsibility to pay a joint debt, a chapter 13 bankruptcy will take care of this debt, despite the divorce decree and debt-assignment. Debt-assignments, such as the above example, are dischargeable in a chapter 13 bankruptcy only. Furthermore, equalization judgments, or property settlements contained in divorce decrees, are dischargeable in a chapter 13 bankruptcy.

BANKRUPTCY & “IN THE NATURE OF SUPPORT”

In order to discharge a property settlement or debt-assignment in a chapter 13 bankruptcy, it must not be “in the nature of support.” If it is in the nature of support, it will be a non-dischargeable debt. For example, what if you agree to pay the Chase bill, and as a result, your spousal support is dropped by $300 per month. This may be a form of support, and non-dischargeable in a chapter 13 bankruptcy. Many of these cases are fact specific as to whether or not the debt-assignment was “in the nature of support.”

The intersection of bankruptcy and divorce debts can be a complicated area, with multiple factors at play. As part of my document production list I provide consumers at my free in-office bankruptcy consultation, I request a copy of the divorce decree. Due to issues relating to the divorce decree, clients may opt to file a chapter 13 bankruptcy to avoid property settlements and debt-assignments.

If you are interested in learning about bankruptcy and how it may interact with divorce debts, please call today for your free in-office bankruptcy consultation in Eugene.

What to Bring to Your Free Bankruptcy Consultation in Eugene

I offer free bankruptcy consultations, both for Chapter 7 bankruptcy and Chapter 13 bankruptcy, in Eugene or by phone.  These bankruptcy consultations generally last about 30-60 minutes, and I review a consumer’s financial situation through a series of questions I ask and I discuss how bankruptcy may benefit the consumer, either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.  Often, I am asked by consumers what documents should I bring to the free bankruptcy consultation?

My general answer is: just bring yourself.  If you decide to file for bankruptcy, I have a list of documents to gather up.  However, with that said, some useful documents to at least review before the free bankruptcy consultation, or even bring, include a few items, listed below:

1. Having a clear idea of how much you or your spouse earn is useful  – Bringing a recent pay stub or last year’s tax return will work for this purpose.  Your income and household size ties into the means test for bankruptcy, and if you qualify for a Chapter 7 bankruptcy.

2. Knowing which debts you have is useful – You can pull free credit reports at Annualcreditreport.com, and you can bring in any bills you have, additionally.

3. If you have been recently divorced, a copy of your divorce decree can prove useful. I look at how property was divided and how debt was divided pursuant to the divorce decree.

4. Any lawsuits or summons for a lawsuit you have received will prove useful.

Again, these are useful documents to have or to have reviewed prior to our free bankruptcy consultation.  However, my general rule of thumb is just bring yourself, and if you decide to file bankruptcy, I have a list of documents for you to gather up.  My approach is that you shouldn’t have additional stress in meeting with an attorney to file bankruptcy, it can be stressful enough!  I try to keep the process as calm and stress-free as possible for my clients, as this can be a very anxiety-ridden time in my clients’ lives.  I try to make the process as streamlined and easy for my clients as possible.

If you would like to schedule your free bankruptcy consultation in Eugene, please call me today.  And if you ask what should I bring to our meeting, my general answer will be: just bring yourself, with the one caveat: if you are getting sued currently, I will need you to bring the lawsuit and/or summons.

I look forward to meeting with you!

 

Sincerely,

Tom Butcher

Attorney at Law

 

 

There’ll Be a New Trustee in Town

Longtime Chapter 13 Trustee Fred Long (who covers the Eugene Region of the District of Oregon) will be retiring in several months.  There is now a search committee at the United States Trustee, a division of the Department of Justice, looking for qualified applicants to fill this position.

The Chapter 13 Trustee’s job, along with his staff, is to administer Chapter 13 Bankruptcy Plans.  Chapter 13 bankruptcy, as discussed in previous posts, is a reorganization bankruptcy, where a consumer makes payments for 3-5 years into a bankruptcy plan; the Trustee’s role is to make certain the plan is feasible (enough money is going into the plan to fund it) and to disburse those funds to creditors.

We’ll keep a close eye out to see who the new Chapter 13 Trustee, for the Eugene Region of the District of Oregon, will be.  Stay tuned…

 

 

Bankruptcy Myths Debunked: Part 2

There are many persistent myths and misconceptions surrounding bankruptcy.  In an earlier post, I addressed 5 such myths and misconceptions.  This post will discuss an additional five myths and misconceptions that may surround bankruptcy.

MYTH 1:  If You Are Married, You Must File Bankruptcy With Your Spouse:  This myth is untrue.  An individual spouse may choose to file by himself or herself, without bringing the other spouse into the bankruptcy filing.  Often, if there is joint debt in the marriage, it will make sense to file for both husband and wife (a joint bankruptcy).  But there are reasons for only one spouse to want to file bankruptcy and not include the other spouse; for example, the spouse filing bankruptcy may have incurred the debt prior to the marriage, the other spouse may have pending legal claims that he or she does not want to get wrapped up in a bankruptcy, the other spouse has no debt to speak of, and so on.

MYTH 2: I Will Lose All My Property If I File For Bankruptcy: This is completely untrue.  In fact, in the vast majority of bankruptcies, consumers will loose no property.  This is largely due to bankruptcy exemptions, or laws that protect your property when you file for bankruptcy.  In Oregon, for example, we have many exemptions that will protect most, if not all, property owned by a consumer.  There are exemptions that help protect household goods, vehicles, real estate, tools, and so on.

MYTH 3: You Can Pick And Choose Who You File Bankruptcy On:  This is also untrue.  When you file bankruptcy, you must list all of your creditors, including any family members, friends, doctors, and so on.   In fact, you are signing under penalty of perjury in your bankruptcy petition that you have listed all known creditors.  Now, after the bankruptcy you may voluntarily pay any creditor that was discharged in the bankruptcy.

MYTH 4: Your Immigration Status Will Be Jeopardized:  This is not true.  Bankruptcy is a federal procedure to discharge debt, not a crime.  Merely filing bankruptcy will not affect an immigrant’s ability to obtain citizenship or maintain permanent residency.

MYTH 5: It Is OK To Max Out Credit Cards On The Eve Of  Bankruptcy:  This is absolutely false!  If there is a clear way to get in trouble, this is it!  Creditors can file an objection in a consumer’s bankruptcy case to make this debt non-dischargeable, or, in other words, the debt may survive the bankruptcy.  In egregious cases, creditors (including the United States Trustee) can move the court to deny a bankruptcy discharge altogether based on such activity, meaning all the debt will come back on the consumer.

This wraps up Part 2 of “Bankruptcy Myths Debunked.”  If you have any questions relating to this material or how bankruptcy may improve your financial situation, please call today to schedule your free in-office bankruptcy consultation in Eugene.

 

New Office Mascot – Bruce the Bankruptcy Beta Fish

Office Mascot - Bruce the Beta Fish

New Office Mascot – Bruce the Bankruptcy Beta Fish

Bankruptcy Myths Debunked: Part 1

There are many myths about bankruptcy floating around.  Some are based on a kernel of truth, while others are flat-out incorrect.  I will dedicate several posts to debunking some of the most common misconceptions and myths about bankruptcy.

MYTH 1:  The “Medical Bankruptcy”:  There is no specific bankruptcy for medical debt per se. Medical debt is general unsecured debt similar to credit card debt. This debt is eliminated through bankruptcy.  Now, one of the main reasons some people file for bankruptcy relief is medical debt.  Some studies have found that medical debt is the biggest reason for filing bankruptcy, but there is no special bankruptcy carved out specifically for medical bills.

MYTH 2:  Medical Bills Are Not Covered By Bankruptcy:  This myth is basically the opposite of Myth #1.  Medical bills are covered by bankruptcy, and by some accounts, medical bills form the basis of most bankruptcy filings.  This myth is a persistent myth, but it is completely untrue.  A variation of this myth is that credit card debt or even pay-day loans are not covered by bankruptcy, which is also false.  I have a sneaking suspicion that this type of myth may be spread by certain debt collectors trying to collect on medical debt or other types of debts.

MYTH 3:YouWill Never Get Credit Again:  This is completely untrue.  Filing bankruptcy, in some ways, may improve your credit-worthiness.  For example, after filing for bankruptcy your debt-to-income ratio dramatically improves.  In fact, credit card companies and car lenders will mine the bankruptcy database, and a few days after a consumer files bankruptcy he or she will receive a deluge of applications for credit cards and car loans (which probably is a good idea to avoid due to some of the high interest rates).  As I have discussed in prior posts, a consumer who files bankruptcy may be eligible for an FHA Mortgage Loan two years from filing, and in some circumstances, only one year from filing.  Now, bankruptcy will be reported on your credit report for up to 10 years, but a consumer’s access to credit is fairly immediate after he or she files for bankruptcy.

MYTH 4:  Everyone Will Find Out That I Filed For Bankruptcy:  This is also false. If you file bankruptcy, the people who will know you filed will be your attorney, the court, any co-debtors (co-signors on loans), any claimants of child/spousal support, and any one you choose to tell. Who files bankruptcy is public information, but only a very small group of people know how to access this information.  Your name will not be printed in the newspaper.  In fact, you probably know several people who have filed for bankruptcy, yet you may be unaware that they filed for bankruptcy.

MYTH 5: There Is A Minimum Amount Of Debt Required To File Bankruptcy:  This is false.  There is no minimum amount of debt a consumer must have to file for bankruptcy relief.  If you cannot pay your current debt with you current income, then bankruptcy may be a very good option to consider, despite your debt-load.

This wraps up Part 1 of “Bankruptcy Myths Debunked.”  If you would like to learn more about bankruptcy and how bankruptcy may improve your financial situation, please call today to schedule your free in-office bankruptcy consultation in Eugene.

Important Questions to Consider at Your Bankruptcy Consultation

There are many important questions that are addressed at a bankruptcy consultation.  Below are a few questions I answer for clients during our free in-office bankruptcy consultations.

1.  Should I File Bankruptcy?  This is by far the most important question.  At my free bankruptcy consultation, I will review with you your financial situation and if bankruptcy makes sense.  We will discuss the different chapters of bankruptcy (chapter 7 bankruptcy or chapter 13 bankruptcy) and which chapter of bankruptcy is most appropriate.  We may even discuss reasonable alternatives to bankruptcy, if such alternatives exist.

2. What Are The Benefits And Consequences Of Filing Bankruptcy?  This is a very important question that I address at my free bankruptcy consultations.  The benefits of bankruptcy usually include eliminating unsecured debt (in a chapter 7 bankruptcy) or getting into a reasonable payment plan or restructuring of your debt (chapter 13 bankruptcy).  I discuss with clients the credit-implications of bankruptcy, such as how long it may take to obtain a home mortgage loan after filing for bankruptcy or rebuilding credit after bankruptcy, and how filing bankruptcy will affect a credit score and access to future credit.

3.  How Much is Your Practice Committed to Bankruptcy?   I believe it is important to find an attorney who focuses primarily on bankruptcy law for your bankruptcy needs.  My practices is focused about 95% on bankruptcy law.

4.  How Much Do You Charge And What Is Included In Your Bankruptcy Fee?  My attorney fee is extremely competitive and based on the complexities of the case.  I generally charge a flat fee for core chapter 7 bankruptcy service.  Chapter 13 bankruptcy is a bit more complex, but most of my fee is paid through the chapter 13 plan (meaning I have the flexibility of reducing my upfront attorney fee).

5.  Who Will Come With Me To Court?  I will.  As your attorney, I will stand by your side through the entire bankruptcy process, from the starting line to the finish line.

6.  What Is The Best Way To Contact You?  I am easily accessible by phone, cell phone and email.  I provide multiple ways for clients to contact me.

7.   What Information Do I Need to Provide You To Start The Bankruptcy Process? I request that clients provide the following documents in order for me to prepare a bankruptcy case: 1) 6 months of income statements, 2) last two years of taxes, 3) copy of your bills/collections notices, 4) credit reports (free at annualcreditreport.com); 5) 6 months of bank statements; 6) any court documents including divorce decrees; 7) any other document pertinent to the particular client’s case.

There are many more important questions to ask, but the above questions are a good start.  At my free consultations, I provide answers to each of these questions plus many, many more.   I strive to offer a respectful and calm approach to clients considering bankruptcy.  This can be a very stressful time, and I believe it is part of my job to help alleviate any stress associated with this process.

Please call today for your free in-office bankruptcy consultation in Eugene.  I look forward to hearing from you.

 

Sincerely,

Tom Butcher

Attorney at Law

 

 

Can Student Loans Be Discharged in Bankruptcy?

Yes, they can.  But it is a very difficult, and expensive process.  This blog entry discusses student loans in the context of both a chapter 7 and chapter 13 bankruptcy case.

Student loans can only be discharged in bankruptcy if the debtor can show that the student loans cause “undue hardship.”  To show “undue hardship,” the debtor must meet three criterion (known as the “Brunner Test”).  These criterion are:

1.  Repayment of the loan would prevent the debtor from maintaining a minimal standard of living;

2.  The debtor’s financial situation is likely to continue for the foreseeable future; and

3. The debtor has made a good faith effort to make payments on the student loan in the past.

If a debtor successfully meets all criteria listed above, the debtor can show that there is undue hardship, and the student loan can be discharged in bankruptcy (this usually requires litigation, though).  However, it is extremely difficult to meet all three criterion.  Often, the federal student loan creditors (government) may make the argument that the loans can be repaid through an income based repayment plan, and be stretched out over several years.  The aim of this approach is to show that the debtor can make payments, especially given the different repayment options available.

There are other ways to approach student loans outside the context of bankruptcy.  This consists of different programs available, especially for federal student loans, such as the income-based repayment plan.   Alternative methods for addressing student loans outside of bankruptcy will be discussed in future posts.

If you have questions about student loans and bankruptcy, please call today to schedule your free in-office bankruptcy consultation in Eugene.

 

Pursuant to 11 U.S. Code § 528: "I am a debt relief agency. I help people file for bankruptcy relief under the Bankruptcy Code."

CAUTION: This website is to provide visitors with basic information about my law office, and information about how to contact me. Every situation is different, and no information on this website is legal advice on any specific question. You should not act on any of the information without first conferring with an attorney licensed in your jurisdiction. No attorney-client relationship or privilege is formed by visiting this site or by unsolicited email. Therefore, initial emails should not contain any confidential information. I may already represent parties adverse to you and cannot advise or represent you until we check for conflicts. I am licensed only in Oregon and offer my services only to those doing business in Oregon, unless I am associated with local counsel in accordance with other states' laws. The applicable laws may have changed after the information on this website was published. While effort is made to keep the information current, you should not presume that all information is up to date. You must confer with an attorney to be sure you have current information.

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