December 11, 2019

Wage Orders & Chapter 13 Bankruptcy

A chapter 13 bankruptcy is a reorganization bankruptcy, lasting usually between 3 and 5 years. Each month of the bankruptcy, a payment must be made by the debtor for the benefit of the debtor’s creditors.  This post discusses the logistics of these monthly chapter 13 bankruptcy payments.

To make these payments, the chapter 13 trustee will require, in most cases, a wage order, or a “voluntary garnishment” served on the debtor’s place of employment.  The debtor’s employer, then, makes the payment each much to the bankruptcy, and this payment is a wage deduction for the debtor.  With the wage order in place, the chapter 13 often enters a “cruise control” phase, whereby the payments are automatic to the chapter 13 bankruptcy.  Statistically, chapter 13 bankruptcies that contain a wage order are more successful than chapter 13 bankruptcies that do not contain a wage order and where the debtor directly makes the payment each month.  Due, in large part, to the higher success rates of a chapter 13 bankruptcy with a wage order in place, the chapter 13 trustee advocates for the wage order strongly.

Once the wage order is in place, a debtor’s employer will make the chapter 13 payment and deduct this amount from the debtor’s payroll.  If the debtor is paid twice a month, then the chapter 13 monthly payment is usually paid half each pay period.

There are certain situations that may warrant not having a wage order.  The most common situation is if a debtor owns his or her business, and therefore must make the payments without a wage deduction.  In this instance, the chapter 13 trustee allows the debtor to make payments directly.  Another example of when a waiver of a wage order may be obtained is when a debtor has just started a new job, and does not want the wage order to potentially negatively effect his or her employment.  If a debtor has been in a job for quite some time, this argument is not very strong, however.  If a wage order is waived by the trustee or by the court, then the debtor will need to send payments directly to the chapter 13 trustee; the chapter 13 trustee, however, will only accept money orders or cashier’s checks in this situation, and not personal checks or automatic bill pay through a bank.

What if you do not want a wage order in your chapter 13 bankruptcy and the chapter 13 trustee insists that we have one?  Well, we can appear before a judge and if our reasons are compelling, we can potentially obtain a waiver of the wage order with the provision that should a payment be missed, the wage order will be implemented immediately.

If you have questions about chapter 13 bankruptcy and wage orders, please feel free to call me today to set up your free in-office bankruptcy consultation.

How Can Bankruptcy Stop My Foreclosure?

Bankruptcy is an extremely useful tool when encountering a foreclosure on real property.  As part of my practice, I do foreclosure defense.  In many cases, bankruptcy is a fall-back option should my clients be unable to obtain a timely mortgage modification.  Sometimes we choose bankruptcy first to stop a foreclosure, rather than alternative options that fall under the spectrum of foreclosure defense.  This article discusses how bankruptcy may stop a foreclosure and when filing a chapter 13 bankruptcy is appropriate when facing a foreclosure action against your home.

The first question I ask when clients are facing a foreclosure, though, is: What is your objective with your home?  Are you trying to save your home, or looking at walking away from your home with the least amount of liability exposure?  If clients are looking at saving their home, we move on to a discussion about the benefits of a chapter 13 bankruptcy.

Chapter 13 bankruptcy allows a client to stop immediately a foreclosure action.  As soon as we file a chapter 13 bankruptcy, we will provide the opposing party (the bank) and the court handling the foreclosure case with notice of the chapter 13 bankruptcy filing.  After stopping the foreclosure action with the bankruptcy filing, we propose a plan in which the arrears on the mortgage can be paid over 3-5 years.  Now, as soon as we file a chapter 13 bankruptcy, current payments on the mortgage will need to be made going forward; otherwise, the bank can move the court for relief from the bankruptcy in order to foreclose on the property.

An Example of How A Chapter 13 Bankruptcy Can Stop a Foreclosure & Save a Home:

Let’s say Ted, a consumer, loses his job and cannot make his mortgage payment for 1 year ($1,100 mortgage payment x 12 months = $13,200).  The bank who holds the mortgage initiates a foreclosure proceeding, and Ted comes to see me.  (Fortunately, Ted has found a new job and can make current mortgage payments going forward.) We are able to file a chapter 13 bankruptcy and immediately stop the foreclosure.  We are also able to place the arrears (the 1 year missed payments on the mortgage, or $13,200) into the bankruptcy to be paid over 3 to 5 years.  Now, Ted must start making his current monthly mortgage payment, and for the next 3 to 5 years, he can pay down on the mortgage arrears (or $13,200) through the bankruptcy.  Ted has successfully saved his home from foreclosure.

A chapter 7 bankruptcy, or liquidation bankruptcy, may disrupt a foreclosure proceeding, but does not have the tools necessary (such as a chapter 13 bankruptcy) to cure the mortgage arrears over time.

If you are facing a foreclosure and would like to learn more about how a chapter 13 bankruptcy filing may stop the foreclosure, please call today to set up your free in-office bankruptcy consultation.


What is the Chapter 13 Bankruptcy Plan?

For every chapter 13 case that is filed, a chapter 13 plan must be submitted to the court and to your creditors.  The chapter 13 plan is probably the most crucial document of your chapter 13 bankruptcy.  This article details what the chapter 13 plan is and why it is so important.

The chapter 13 plan must be filed along with, or shortly after, your chapter 13 bankruptcy petition is filed with the bankruptcy court.  The plan proposes to the court and your creditors the following items:

1. The length of the plan (36 – 60 months)

2. The monthly payment into the plan by the debtor

3.  If mortgage arrears or vehicle loan arrears will be paid through the plan

4.  If secured debt, such as a car, will be paid through the plan (including if the interest rate and loan amount will be altered)

5.  How much your attorney will be paid through the plan

6.  What percentage will your unsecured creditors be paid through the plan

7.  If there is a best interest amount in your bankruptcy, or the minimum amount your unsecured creditors must be paid through the plan

8.  Indication of what debt may be paid outside of the plan

9.  If any judicial liens will be avoided through the plan

10.  And other provisions depending on the circumstances of a particular case

Once the plan is filed with the court, the court will provide notice to your creditors and chapter 13 trustee.  At the hearing before the trustee, the trustee will review the plan to determine if you filed it in good faith and it is fair and reasonable to your creditors, given your particular set of facts.  The trustee will also make certain that the plan is feasible, meaning the amount you propose to pay into the plan will adequately fund the plan.

Creditors and the trustee will have an opportunity to object to the plan.  If the trustee or creditors object (usually based on if the plan is adequately funded or if a creditor receives fair treatment through the plan), we work to resolve the objections.  Once all objections are resolved, we submit to the trustee a document called an Order Confirming Plan and Resolving All Motions.  A bankruptcy judge will review the Order Confirming Plan, and a hearing will be held regarding the plan, called a Confirmation Hearing.  If all objections are resolved, the bankruptcy judge will sign off on the Order Confirming Plan and your plan takes legal effect.

If you are interested in learning more about chapter 13 bankruptcy and the mechanics of the bankruptcy and plan requirements, please call today to schedule 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.

Emergency Bankruptcy

There is a bankruptcy known as an emergency bankruptcy.  This is not a special type of bankruptcy, but takes the form of either a chapter 7 bankruptcy or a chapter 13 bankruptcy.  An emergency bankruptcy deals more with process than substance.  This article discusses what an emergency bankruptcy is and when it is appropriate.

An emergency bankruptcy simply is the filing of an incomplete bankruptcy.  The minimum documents that are required to be filed with the court, which form the basis of an emergency bankruptcy, are:  1.) the Voluntary Petition; 2.) Mailing Matrix; and, 3) Statement of Social Security Number.  By filing the minimum requirement for documents in your bankruptcy, you have just filed an emergency bankruptcy case.  This applies to both a chapter 7 bankruptcy case and a chapter 13 bankruptcy case.  Additionally, for a chapter 7 bankruptcy you can pay the filing fee on installments (the first installment is due within about 30 days) and for a chapter 13 bankruptcy an initial filing fee of $185 must be paid.

Now, why would a person file an emergency bankruptcy? Sometimes, as a bankruptcy attorney, I am not called until the 11th hour by a potential client who needs to file a bankruptcy to stop a garnishment, foreclosure, or other civil law matter.  As soon as we file the emergency bankruptcy, the bankruptcy’s automatic stay is triggered, which stops foreclosures and most collections activities.  I have helped clients before whose home was to be foreclosed within a few short days.  Although we did not have all the documents gathered for a complete bankruptcy, we had enough to file an emergency chapter 13 bankruptcy and stop the foreclosure.  This can also be a common case when someone needs to stop a garnishment, right before his or her wages will be garnished.

Once an emergency bankruptcy is filed, the debtor has 14 days to file all deficiencies, or documents that need to be filed to complete the chapter 7 bankruptcy or the chapter 13 bankruptcy.  Usually, we are able to gather and file all missing documents within the 14 day period.  Occasionally, however, we must file a motion with the court to seek an extension of the 14 days in order to have enough time to file all missing documents.

Ideally, it is better to plan and file a complete chapter 7 bankruptcy or chapter 13 bankruptcy from the beginning.  But sometimes circumstances necessitate the filing of an emergency bankruptcy.

If you are facing foreclosure or are about to be garnished at work, please contact me to set up a free in-office bankruptcy consultation in Eugene.  If we need to file an emergency bankruptcy, I can accommodate your schedule. My turn-around time can be extremely fast.

Oregon’s Family Expense Statute, Separate Property State & Bankruptcy

Oregon is a separate property state surrounded by community property states (Washington, Idaho, Nevada and California).  There is, however, an exception to the separate property concept with Oregon’s “Family Expense Statute.”  This article details the Family Expense Statute in the context of a separate property state and also discusses how bankruptcy interacts with this statute. But first, a few definitions are in order.

Separate Property State (Oregon)

A separate property state, which Oregon is,  simply means that your property is your property, and your spouse’s property is your spouse’s property.  If your name is on the car or the house, but your wife’s name is not, you own the house or the car and not your wife (although your wife may claim an equitable interest in the property, in some instances).  This applies generally to debt as well; if your name is on the credit card and your wife’s name is not, you are liable for the credit card, not your wife.

Community Property State (California, Nevada, Idaho, Washington, etc.)

In a community proper state, such as California, a husband and wife own property, equally, obtained during the marriage, despite only one spouse’s name being attached to the property.  For example, a married couple in California: if the husband purchases a house without the wife’s name during the marriage, the wife will be considered owner of the house, as well. Income and debts, in a community property state, are owned by the other spouse as well.  Therefore, if the wife has a bank account with wages in it but without the husband’s name on the account, the husband also owns the wages in the account (in a community property state).  Additionally, in a community property state, if the husband takes out a credit card during the marriage in his name only, this debt becomes the wife’s debt as well.    Oregon is a separate property state; therefore the rules of community property do not apply.

Oregon: A Separate Property State

Since Oregon is a separate property state, debts incurred during the marriage by one spouse is not the other spouse’s responsibility, with the exception of the Family Expense Statute.  Also, property acquired by one spouse in Oregon is not the other spouse’s property, unless the other spouse’s name appears on title (the other spouse may have an equitable interest in the property, nonetheless, if the other spouse’s resources went to obtaining that property).

Oregon’s Family Expense Statute

Therefore, the general rule is: debts incurred by husband are husband’s debts in Oregon, not wife’s; and, debts incurred in Oregon by wife are wife’s debts not husband’s.  This concept, however, is turned on its head with Oregon’s Family Expense Statute (ORS Sect. 108.040), which states: “The expenses of the family and the education of the minor children are chargeable upon the property of both husband and wife, or either of them, and in relation thereto they may be sued jointly or separately.”  This statute usually comes up with medical debt.  For example, if a husband incurs medical debt only in his name, the provider of the medical service can ultimately pursue the husband and wife for this bill.  Often, when the medical provider is seeking a judgment in such a case, the medical provider will sue both the husband and the wife, despite the fact that only the husband incurred the debt.  With a judgment in hand, the medical provider can garnish both the husband’s and the wife’s wages and bank accounts.

Oregon’s Family Expense Statute & Bankruptcy

What are the ramifications of the Family Expense Statute and bankruptcy?  Often, if I have a client who has incurred substantial medical debt, and whose wife is relatively debt free, I will have a discussion about Oregon’s Family Expense Statute, and how the wife may be liable for the husband’s medical debt.  I discuss the possibility of including the wife in the bankruptcy filing, and thereby filing a joint bankruptcy.  Since I generally do not charge more for a joint bankruptcy (husband and wife) than an individual bankruptcy, the other spouse may easily join the bankruptcy.  If one spouse files bankruptcy first, and then the other spouse is later sued by the medical provider under Oregon’s Family Expenses Statute, a second bankruptcy may need to be filed.  In many cases, then, it makes sense to file a joint bankruptcy (husband and wife) rather than potentially two bankruptcies.

If you have questions about bankruptcy and how Oregon’s Family Expense Statute may apply to your situation, please contact me today for your free in-office bankruptcy consultation in Eugene.




Credit After Bankruptcy

Bankruptcy is not the end-all of credit many people believe it to be.  When used wisely, credit is an important part of our economy and financial lives.  This article details aspects of credit and building credit after filing a bankruptcy.

It goes without saying that filing bankruptcy negatively impacts one’s credit.  For example, a chapter 7 bankruptcy filing stays on a person’s credit report for 10 years while a chapter 13 bankruptcy stays on a person’s credit report for 7 years.  I never quite understood this difference in reporting other than people, somehow, are being rewarded for filing a chapter 13 bankruptcy over a chapter 7.  I do not have empirical evidence to support how much of a person’s credit score may be negatively impacted by the filing of a bankruptcy, but often times a person’s score dips below a 550.  FICO, or the main organization that mathematically determines a person’s credit score, indicates that the effect of a bankruptcy on a person’s credit score is determined by the person’s complete credit profile; therefore, depending on many factors, a credit score may be affected differently from one person to another when filing for bankruptcy relief.

But you can rebuild credit fairly fast after you file bankruptcy.  For example, I have written on the subject of reaffirmation agreements and secured debt, such as a car loan.  By reaffirming a car loan through bankruptcy, this will help rebuild credit after bankruptcy.  Reaffirmed debt (usually secured debt) will be treated as normal debt on your credit report, as opposed to debt discharged in a bankruptcy.  And continued timely payments on a reaffirmed debt will help bolster your credit score.

Clients are often surprised that when they file bankruptcy they receive many offers for credit cards and car loans; usually at very high interest rates, though.  The lenders mine the bankruptcy database to send newly-filed bankruptcy debtors credit card and car loan offers for two main reasons: 1) the debtor’s debt-to-income ratio has vastly improved (as the old debt was discharged in bankruptcy); and, 2) people can only file chapter 7 bankruptcy every 8 years and therefore the lenders feel more secure in lending.

I alluded to the debt-to-income ratio above.   By filing bankruptcy, you will get rid of most, if not all, of your debts.  As a result, your debt-to-income ratio (or how much debt you have compared to how much you earn) vastly increases.  This will make you more credit-attractive to lenders.

Now, what is the best way to rebuild credit after you file bankruptcy?  The number one thing is to pay current bills on time.  Second, you can open a secured credit card at a bank, where you secure the credit card with your own funds.  For example, you have $500 in an account, and you are issued a secured credit card for $500.  This secured credit card will be reported to the credit bureaus; so all payments made on time will have a positive impact on your credit score.  This type of credit card, however, will have an interest rate attached and often an annual fee.  The idea will be to use this card and pay it off every month; this strategy will help boost a person’s credit score.

There is also ample opportunity for unsecured credit cards as discussed above.

The bottom line, however, is this: if you use credit wisely and pay your bills on time, you can rebuild credit fairly fast after bankruptcy.

If you have questions about bankruptcy and how it may impact future credit, please feel free to call me today for a free in-office bankruptcy consultation to discuss this matter further.

Over Payment of Government Benefits

I meet clients from time to time who have received an over payment of government benefits, such as unemployment compensation or Social Security benefits.  Under particular circumstances, such over payment of benefits may be dischargeable in a bankruptcy.  But in other circumstances, such an over payment of benefits may become a non-dischargeable debt in bankruptcy.  This article details over payment of benefits and when such benefits may be eliminated through a chapter 7 bankruptcy or a chapter 13 bankruptcy.

If you got over-paid  with a government benefit and the government realizes this over payment, the government may try to pursue this over payment by wage garnishment (distraint warrant through the State), filing a lien in some instances, offset of current benefit (Social Security, for example), or denial of a benefit for a period of time (unemployment benefit through the State).  Facing these methods of recourse, people often look toward bankruptcy for some relief.

Generally, over payment of government benefits are dischargeable in bankruptcy. But, there are some exceptions to this.  If the over payment of the benefit was the mistake of the government (State or Federal; unemployment compensation; Social Security benefits, etc.), this will be a dischargeable debt in bankruptcy.  If the over payment was a result of fraud or misrepresentation by the recipient of the benefit, this over payment may not be dischargeable.

Like any other creditor, Oregon and the Federal government have only a certain amount of time (about 90 days) to file an objection with the bankruptcy court to determine that the over payment is a non-dischargeable debt in the bankruptcy.  Often, the State and the Federal government will file this objection if there is clear evidence that there was fraud or false pretense involved in obtaining the benefit or the level of benefit originally. If the State and Federal government have received proper notice of the bankruptcy yet fail to file an objection, this debt will be discharged through the bankruptcy.

For example, if the government makes a mistake in calculating a benefit amount and over pays a person, by no fault of that person, this debt should be dischargeable in bankruptcy.  However, if a person, for example, is collecting unemployment compensation and is also working and collecting wages (when they should not be doing both), the government can argue the person continued to receive unemployment compensation through fraud and/or false pretense by continuing to claim unemployment compensation when he or she had a job.  In this case, if the government files an objection in the bankruptcy, this over payment may become a non-dischargeable debt; meaning it will not be eliminated in the bankruptcy.  If the government files such an objection and there are grounds to fight this objection, litigation in the bankruptcy court may pursue to determine if this debt is dischargeable or non-dischargeable through the bankruptcy.

If you have an over payment of benefits, and Oregon or the Federal Government is trying to collect on this over payment, please call me today to discuss what options you may have and if this over payment will be dischargeable in bankruptcy or not.


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

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