June 26, 2017

Time Barred Debt; or, Debt that Lives on Past its Expiration Date.

If debt were milk, this milk would be rotten. I am speaking about old debt, or time-barred debt.  This article addresses time-barred debt, how to respond to time-barred debt, and how bankruptcy may play into the analysis.

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Bankruptcy Hearing – What If I Cannot Attend on the Date the Hearing is Set For?

Every time a bankruptcy is filed, a corresponding bankruptcy hearing is set.  This hearing is commonly called the “Meeting of Creditors” hearing, or the 341(a) hearing (which is the section of the bankruptcy code that establishes this mandatory hearing requirement).  At this hearing, a bankruptcy trustee will ask a series of questions (as described in an earlier post) of the debtor, and creditors have a chance to ask the debtor (the person who has filed bankruptcy) questions under oath, as well.  Creditors, however, largely do not appear at this bankruptcy hearing, although they have the legal right to do so. [Read more…]

Median Income & Bankruptcy: Getting Through the Door for a Chapter 7 Bankruptcy

For consumers, there are two main types of bankruptcy: Chapter 7 bankruptcy and Chapter 13 bankruptcy.  Chapter 7 bankruptcy is by far the most widely used form of relief in the bankruptcy spectrum.  But there are certain conditions that must be met to qualify for a Chapter 7 bankruptcy.  This post details the most important condition that must be met – the consumer who files bankruptcy must be below median income (in some cases the consumer can be above, but other conditions must be met).

The means test is based on US Census Bureau statistics and updates every 6 months. If you are below median income (theoretically half the people are below this threshold and half the people are above this threshold) then you automatically qualify for a Chapter 7 bankruptcy.  However, if you are above-median income, then you will not automatically qualify for a Chapter 7 bankruptcy (however, if you have certain deductions, such as high medical expenses or secured debt, you may still be able to qualify for a Chapter 7 bankruptcy).

The median income most recently was adjusted in May 2014.  It will adjust again in October.  Currently the median income for household size follows:

  • for a household of 1: a person qualifies  for a Chapter 7 bankruptcy if he or she makes less than $45,435 per year
  • for a household of 2: a person qualifies for a Chapter 7 bankruptcy if he or she makes less than $56,382
  • for a household of 3: a person qualifies for a Chapter 7 bankruptcy if he or she makes less than $61,582
  • for a household of 4: a person qualified for a Chapter 7 bankruptcy if he or she makes less than $71,849
  • For each additional person in the household, the amount increases by $8,100.

Even if you are above median income you may still qualify for a Chapter 7 bankruptcy.  If you do not qualify for a Chapter 7 bankruptcy, then a Chapter 13 bankruptcy is a consideration.

If you are interested in filing a Chapter 7 bankruptcy and want to know more about the means test, please call today for a free in-office bankruptcy consultation.

 

Bankruptcy Filing Fees Set to Increase

The Judicial Conference has announced that filing fees for bankruptcy will increase.  This increase will affect all new bankruptcy cases filed on and after June 1, 2014.  Chapter 7 bankruptcy and Chapter 13 bankruptcy filing fees will increase by $29 each.

FEE INCREASE BREAKDOWN

  • The Chapter 7 bankruptcy filing fee will increase from $306 to $335.
  • The Chapter 13 bankruptcy filing fee will increase from $281 to $310.

These fees can still be paid on installments after the bankruptcy is filed.  

Please note that my attorney fee will remain the same.

If you have any questions regarding bankruptcy or the court fee for filing bankruptcy, please contact my office for a free consultation.  

 

 

 

FHA Mortgages & Bankruptcy: You May Only Have to Wait One Year After Bankruptcy to Qualify

Conventionally, it took two years, minimum, to obtain an FHA mortgage loan after filing bankruptcy, provided all required criteria were met.  The FHA (Federal Housing Administration, part of the U.S. Department of Housing and Urban Development) recently changed its guidelines to allow FHA mortgage loans to individuals only 1-year outside of bankruptcy.  This post discusses this program and how it may apply to consumers who recently filed bankruptcy.

FHA Mortgage Loans are government-backed mortgage loans, whereby the government insures lenders against borrower-defaults.  Often, borrowers pay a higher mortgage payment as a result of this insurance.  Should the borrower default on the mortgage, the mortgage lender may be made whole by the government.  Under this program, home mortgages are more-readily given to borrowers who are considered higher-risk, such as first-time home buyers, or borrowers who have a bankruptcy or a foreclosure in their past.

Traditionally, an individual would be eligible for an FHA Mortgage 2 years outside of bankruptcy.  However, the FHA has changed this 2 year waiting period to a 1 year waiting period, under certain circumstances.  This program is known as the FHA’s “Back to Work – Extenuating Circumstances” Program. To be eligible for this program a borrower must show:

1. That the borrower has experienced an “Economic Event,” which is any event beyond the borrower’s control that results in a 20% or greater reduction in the borrower’s household income for a minimum of 6-months due to loss of employment, income, or both;

2. That certain negative credit ratings resulted from this loss of household income or employment;

3.  That the borrower has made a full economic recovery; and

4. That the borrower has completed housing counseling

The FHA’s “Back to Work – Extenuating Circumstances” Program provides a vehicle whereby a loan may be guaranteed by the FHA, but the individual lender must still approve the loan in the first place.

If you are contemplating bankruptcy and are concerned about a future home purchase, please call today to schedule your free in-office bankruptcy consultation.

 

Disecting a Credit Report for Bankruptcy

I have previously written an article on obtaining free credit reports each year from Annual Credit Report.  This present post goes into detail on how to read a credit report once it is obtained, and how the credit report is used for constructing a chapter 7 bankruptcy or a chapter 13 bankruptcy.

Under Federal Law, the three main credit bureaus must provide a free credit report every year to consumers.  The three major credit reports are: Exquifax, Transunion, and Experian. But once you pull your reports, how do you read the reports in the context of preparing a bankruptcy petition?  What information is contained in these reports?

The information contained in the reports are fairly uniform throughout each of the three reports.  For each account that is reported to the credit bureaus, certain information is provided by the creditor.  First, the kind of credit a particular account is will be reported.  Generally, credit falls into two categories, installment or revolving.  Installment credit is credit based on installment payments, such as a car loan or a mortgage loan.  Revolving credit represents credit cards, and other forms of credit, that you can build up the balance and pay down the balance over time.  Second, the credit report will indicate if the account is owned by you alone (individual), or jointly owned (co-signer) or if you are an authorized user.  Third, the credit report will indicate information regarding the account in terms of total amount of credit allowable and the highest balance you may have maintained, and so forth.  Fourth, the credit report will indicate how much you actually still owe on the account (credit reports are updated monthly). Fifth, the credit report will also indicate if there is a fixed or minimum payment amount that is contractually required. Sixth, the credit report will indicate the status of the account.

Status of the account is a factor I pay extremely close attention to when constructing a bankruptcy.  An account can be open, closed, inactive, paid, charged-off, or transferred.  If an account has a balance, or has been charged off, or transferred, these are the accounts we must include in the bankruptcy filing, even if such account shows a zero balance (we list it as precautionary, then, in the bankruptcy).  Accounts that have a zero balance and that are closed and paid off, we do not list in the bankruptcy.  There is, however, a certain level of errors contained in credit reports.  I will review the credit reports with clients to ensure we have all the creditors listed.  (I also have clients bring in any bills they may have, and write down any creditors they can recall for which they may not have a bill for or that may not be included on the credit report.)

We always list charged-off accounts in a bankruptcy filing.  What are charged-off accounts?  This is a statement from the creditor that this account is probably not collectable.  This does not mean the debt is no longer valid.  Therefore, we always list charged-off accounts when constructing a bankruptcy.  A creditor can, theoretically, pull the account back and pursue the debt, sell the debt to a third party (such as a junk debt buyer), or cancel the debt and issue a 1099c income statement to the borrower (to be discussed in more depth in a future post).

In conclusion, credit reports, and what is reported by creditors, form part of the basis of what we use in constructing a bankruptcy.  As part of my document production, I always have clients pull credit reports as the reports provide quite a bit of useful information when constructing a bankruptcy petition.

If you are interested in bankruptcy or learning more about bankruptcy, please call for a free in-office bankruptcy consultation today

 

 

Certain level of errors

Will People Find Out that I Filed Bankruptcy?

A common question I receive is: “Will people find out if I file bankruptcy?”  This post details who will find out about your bankruptcy, and who will probably never find out about your bankruptcy (unless you first disclose this fact to them).

A bankruptcy filing is a public filing; it becomes part of the public record.  However, it is difficult for the average person to access this record, and even difficult for many attorneys to access this record, unless they practice in bankruptcy and/or the federal court system.  So, who will find out that you filed bankruptcy?

First, your creditors will find out you filed bankruptcy; this is a given.  We file bankruptcy for relief from our creditors. Second, any co-borrowers or co-signers will receive notice of our bankruptcy.  Co-borrowers’ or co-signer’s will be affected by our bankruptcy; we will usually no longer be financially liable for the debt these individuals co-signed — therefore, notice must be provided. Third, if we have a domestic support obligation (child  support, spousal support, etc.) that claimant, or person who receives these payments, must receive notice of the bankruptcy and special notice must be made to the trustee in such cases (see DSO Form post).  Third, the credit bureaus will receive notice that we filed bankruptcy via the creditors we list in our bankruptcy. Our credit reports will, then, report that we filed bankruptcy. Fourth, prospective lenders of credit and car loans will discover we filed bankruptcy  – as soon as you file bankruptcy you will receive applications for credit cards and car loans.  Lenders will use the bankruptcy court’s database to establish new business.

Your friends and family will most likely never know you filed bankruptcy unless you inform them first that you have.  The newspaper does not print the names of people who filed bankruptcy.  To access information regarding who filed bankruptcy, a person would need to go down to the bankruptcy court to search names (this is no easy task);  or, have access to the bankruptcy court’s database, which is not granted easily (generally you must be an attorney or creditor).

Therefore, when I am asked “will anyone know I filed bankruptcy,” my answer is: creditors, the court, co-borrowers, claimants of domestic support obligations, but hardly ever any friends or family.  Rest assured, although bankruptcy is a public activity, few people will know if you file bankruptcy or not. And in fact, I am certain that you know at least three people (if not more) who have filed bankruptcy, yet you are unaware that they have filed bankruptcy.

If you are interested in bankruptcy and would like to learn more about the process, please call today for your free in-office bankruptcy consultation.

 

The Chapter 13 Bankruptcy Debt Limit

I meet with clients almost daily.  During my free in-office bankruptcy consultation, I conduct an in-depth analysis of a client’s legal issues as it pertains to bankruptcy. Most often, a client will choose to file a chapter 7 bankruptcy, provided he or she meets the eligibility requirements for a chapter 7.  If the circumstances warrant a chapter 13 bankruptcy filing, I will discuss with a client how a chapter 13 operates and, given the facts, how this chapter of bankruptcy may be the best option.  But sometimes a client may not be eligible to file a chapter 13 bankruptcy, although this chapter may be the most preferable given a client’s particular set of facts.   One reason a chapter 13 bankruptcy filing may not work is that a client may have too much debt.  This post discusses the chapter 13 restriction of debt load in-depth.

A chapter 13 bankruptcy, or a “restructuring bankruptcy,” is a bankruptcy that lasts between 3 to 5 years, with monthly payments being made by the consumer for the benefit of creditors.  A chapter 13 bankruptcy does have certain restrictions, however, particularly when it comes to how much debt a consumer can have to be eligible to file a chapter 13 bankruptcy.  Currently, a consumer must have less than $360,475 in unsecured debts (not attached to collateral, such as medical bills, credit card bills, etc.) and less than $1,081,400 in secured debt (such as mortgages on a house, car loans, etc.).  These numbers adjust periodically.

Most people who consider filing a chapter 13 bankruptcy fall below these total debt thresholds. But what if a consumer exceeds these thresholds?  What options does he or she have?

I recently wrote a post on “Chapter 20” bankruptcy (chapter 7 + chapter 13) detailing one strategy to combat the debt ceiling.  If a consumer’s debt is higher than the allowable thresholds for a chapter 13 bankruptcy, one option is to file a chapter 7 bankruptcy, eliminate the unsecured debt, and then file a chapter 13 bankruptcy on the heels of a chapter 7 bankruptcy.  Often times, by eliminating the dischargeable unsecured debt first in a chapter 7 bankruptcy filing, this may qualify a consumer for a chapter 13 bankruptcy filing since the debt load may substantially decrease.  Using a “Chapter 20” approach applies in a very narrow set of circumstances, though.

The other option we always consider before looking at a chapter 13 bankruptcy, is a chapter 7 bankruptcy filing.  A chapter 7 bankruptcy will eliminate most debts and contains absolutely no debt ceiling.  But to file a chapter 7 bankruptcy, certain eligibility requirements must be met first.  For example, a consumer must not have filed a chapter 7 bankruptcy in the previous 8 years.  The second eligibility criteria for a consumer is to be able to pass the chapter 7 bankruptcy “means test” which is based on income and household size.  If a consumer’s income is too high based on household size he or she may be ineligible to file for a chapter 7 bankruptcy.  Therefore, in some instances a consumer may not even qualify for a chapter 7 bankruptcy.

Now, what if a consumer is above the debt threshold of $360,475 in unsecured debt and/or $1,081,400 in secured debt, and he or she does not qualify for a chapter 13 bankruptcy? And what if that same consumer’s income is too high to be eligible for a chapter 7 bankruptcy? Where do you turn?  Chapter 11 bankruptcy.

Chapter 11 bankruptcy is mainly for business reorganization, but can be a useful bankruptcy tool for some consumers who do not qualify for a chapter 7 bankruptcy because of too high of income and does not qualify for a chapter 13 because of too high of debt load.  Chapter 11 is a very complicated form of bankruptcy.  The situation that necessitates the need to file a chapter 11 bankruptcy for an individual consumer is rare.

If you are interested finding out more about bankruptcy, please call today to schedule your free in-office bankruptcy consultation in Eugene.

 

 

“Chapter 20” Bankruptcy

You may have heard of a Chapter 7 Bankruptcy.  And you may have heard of a Chapter 13 Bankruptcy.  But you probably have not heard of a “Chapter 20” Bankruptcy. While not technically a chapter of bankruptcy, “Chapter 20” bankruptcy nonetheless is an important strategy when dealing with very specific financial fact patterns.

As I have detailed in many earlier posts, a Chapter 7 Bankruptcy is a liquidation bankruptcy, where you can eliminate most, if not all, of your debt.  The time frame usually is about 90 days from start to finish.  The second most common type of bankruptcy is a Chapter 13 Bankruptcy, or a “wage earner’s” bankruptcy.  A chapter 13 bankruptcy generally lasts between 3 to 5 years, and the consumer makes monthly payments during that period for the benefit of his or her creditors.  But what, then, is a “Chapter 20” bankruptcy.

A “Chapter 20” Bankruptcy is more of a procedural matter.  Simply stated, it is filing a chapter 7 bankruptcy first, followed by filing a chapter 13 bankruptcy immediately after.  Therefore, chapter 7 plus chapter 13 renders a chapter 20, despite the fact that two bankruptcies are being filed separate of one another.

Why would a consumer file a “Chapter 20” bankruptcy?  This seems like a lot of work!

There a couple of important situations when filing a “Chapter 20” Bankruptcy is useful.  First, there are debt limits to filing a chapter 13 bankruptcy; if you have too much debt, you do not qualify for a chapter 13 bankruptcy.  However, if you qualify for and file a chapter 7 bankruptcy, this will eliminate most debts.  By eliminating a large portion of your debts first through a chapter 7 bankruptcy filing, you can then move onto filing a chapter 13 bankruptcy.  This may be especially useful if you need to avoid a second lien on your property and catch up on mortgage arrears on your primary mortgage, but you can only accomplish this in a chapter 13.  Additionally, by filing a “Chapter 20” bankruptcy, this may reduce the time that you are actually in a chapter 13 bankruptcy (as you are no longer focusing on debts eliminated in your chapter 7 filing).

While you will obtain a bankruptcy discharge in a chapter 7 bankruptcy, you will not receive a bankruptcy discharge in an immediately following chapter 13 bankruptcy.  But this is okay; we are using the chapter 13 to pay down debt that will not be taken care on in a chapter 7 bankruptcy — hence, a “Chapter 20” bankruptcy.

By filing a “Chapter 20” bankruptcy, you can also focus more of your energy and resources on non-dischargeable debts, such as taxes.  For example, if you have $50,000 in medical debt, $20,000 in credit card debt, and $30,000 in non-dischargeable unsecured tax debt (a special type of tax debt), the benefits of a “Chapter 20” bankruptcy become immediately apparent.  By filing a chapter 7 bankruptcy first, you will get rid of the medical debt and the credit card debt, but you will be stuck with the tax debt. If you file a chapter 13 on the heels of a chapter 7 (“Chapter 20”), the chapter 7 will take care of the dischargeable debt so that the chapter 13 bankruptcy can focus exclusively on the tax debt (non-dischargeable debt), for which you will have up to 5 years to pay down.

While a “Chapter 20” bankruptcy is not a true chapter of bankruptcy, it is nonetheless a viable strategy when dealing with particular debts and very specific fact patterns.  If you are interested in learning more about chapter 7, chapter 13, or even “Chapter 20” bankruptcy, please call today to schedule a free in-office bankruptcy consultation in Eugene.

The Many Chapters of Bankruptcy

As a consumer bankruptcy attorney, I limit my practice to chapter 7 bankruptcy and chapter 13 bankruptcy filings.  Most individuals and small businesses fall into either one of these two types of bankruptcies.  But there are many other chapters of bankruptcy beyond just a chapter 7 bankruptcy and a chapter 13 bankruptcy.  This article discusses chapter 7 and chapter 13 bankruptcy along with the lesser known chapters of bankruptcy, and when and why these chapters may be appropriate.

Chapter 7 Bankruptcy: A chapter 7 bankruptcy is the most common bankruptcy for consumers.  Also known as a liquidation bankruptcy, chapter 7 eliminates most, if not all, consumer debts.  The time frame, from start to end, is usually about 90 days.  When people think about bankruptcy, they usually think of chapter 7.

Chapter 9 Bankruptcy: A chapter 9 bankruptcy is a bankruptcy specifically tailored for government municipalities to reorganize debt.  For example, both Stockton, California, and Detroit, Michigan are currently in chapter 9 bankruptcy proceedings.

Chapter 11 Bankruptcy:  A chapter 11 bankruptcy usually applies to businesses and is used as a restructuring tool.  A few of the major car manufactures have entered into a chapter 11 bankruptcy, and have come-out of the process as a restructured company (such as Chrysler); however, other companies have attempted a chapter 11 restructuring, but failed, and ultimately converted to a chapter 7 bankruptcy (Hostess, for example).

Chapter 12 Bankruptcy: A chapter 12 bankruptcy is exclusively available to family farmers and fishermen.  This form of bankruptcy is similar in substance and procedure to a chapter 13 bankruptcy.

Chapter 13 Bankruptcy:  A chapter 13 bankruptcy is the second most common type of bankruptcy, following chapter 7.  A chapter 13 bankruptcy allows for the restructuring of a consumers debt over 3-5 years, where the consumer makes monthly payments to the plan for the benefit of creditors.  Often, a chapter 13 bankruptcy is used to stop a foreclosure and catch up on mortgage arrears, pay down tax debt and domestic support obligations, cram down vehicle loans in terms of a principal reduction of loan amount and interest rate,avoid second liens on properties (in some instances) such as home equity lines of credit, and so on.  In some instances, a consumer may not be eligible to file for a chapter 7 bankruptcy due to high income or a prior chapter 7 bankruptcy filing, and therefore must file a chapter 13 bankruptcy instead.

Chapter 15 Bankruptcy: A chapter 15 bankruptcy is designed for ancillary or cross-border claims; this includes debtors, assets, and claimants involving multiple countries.

Chapter 7 bankruptcy and chapter 13 bankruptcy are the most well-known of the bankruptcy chapters in the United States.  However, there are other chapters available for a debtor (individual, business, municipality), provided the right circumstances exist.

If you are interested in learning more about bankruptcy and how it may benefit your financial situation, please call today for a 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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