Charlotte Bankruptcy Blog

Posts containing useful information for anyone considering a North Carolina bankruptcy lawyer.

How Does Unemployment Affect Bankruptcy?

, ,

How Does Unemployment Affect Bankruptcy?

Many individuals are currently seeking advice regarding unemployment and bankruptcy. Prior to filing bankruptcy, when individuals are fighting off creditors, there are often questions as to whether unemployment can be garnished. We answered those questions in a previous post and the news is mostly good news. However, if you are tired of fending off creditors and want a permanent solution to cash flow, a Chapter 7 or Chapter 13 bankruptcy may be the answer.

Can I Qualify For Bankruptcy If I Receive Unemployment?

Yes. When qualifying for bankruptcy, the Chapter 7 court looks at your income for the 6-month period prior to your bankruptcy filing date. If your income is lower than the Median Income for a household of your size, you can qualify automatically for bankruptcy. Below you will find totals for household size, monthly income, and annual income:

HOUSEHOLD SIZE                             MONTHLY INCOME                         ANNUAL INCOME

1                                                                  $3,992.00                                             $47,904.00

2                                                                 $5,078.83                                             $60,946.00

3                                                                 $5,660.92                                             $67,931.00

4                                                                 $7162.33                                              $85,948.00

 

Remember, the bankruptcy court is looking at the most recent 6 months of income. If you have been collecting unemployment, chances are you are well below these totals. Even if your income or your combined household income exceeds these totals, you may still pass The Means Test in bankruptcy. The Means Test looks at your overall income vs. your overall ongoing expenses. It represents an equitable approach to providing bankruptcy relief for those who make more than the Median Income, yet who still deserve debt relief.

Do Stimulus Funds Hurt My Bankruptcy Filing?

If you have received stimulus funds from the federal or state government related to the Coronavirus, the funds will not be counted as income for the purposes of determining whether you qualify for Chapter 7. However, those funds are part of the Bankruptcy Estate. This means that if you still have some of your stimulus funds on hand when you file bankruptcy, you will need to exempt them or risk losing them to the court. In most cases, the funds can be exempted, and your bankruptcy lawyer will explain how this works.

Do Stimulus Funds and Unemployment Affect Bankruptcy In Chapter 13?

Unfortunately, if you are receiving unemployment income only, it may not be enough to show that you qualify for Chapter 13. If you are considering a Chapter 13 for the purpose of getting current on a mortgage or car loan, your incoming monthly unemployment will have to exceed your monthly expenses in order to successfully enter Chapter 13. Additionally, while the stimulus funds are helpful to your budget, they can not be factored in when considering your anticipated ongoing disposable income in a Chapter 13 filing. Again, these concerns are only for a Chapter 13.

Speak With A Charlotte Bankruptcy Lawyer Today

Getting started with bankruptcy planning is easy. We are happy to discuss further with you how unemployment can affect bankruptcy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.

 

/by

Are Stimulus Funds Protected In Bankruptcy?

,

Are Stimulus Funds Protected In Bankruptcy?

Whether your stimulus funds are protected in bankruptcy is a function of two things: Current Monthly Income (CMI) calculations, and the Bankruptcy Estate. We can easily address both concerns, which will hopefully give you a better understanding of what happens to your stimulus funds in a Chapter 7 bankruptcy.

Current Monthly Income In Bankruptcy

Generally speaking, one way to qualify for a Chapter 7 bankruptcy is to calculate your CMI. The bankruptcy code takes a broad definition of income, and includes gifts, inheritance, W2 income, income from small business, etc. If you’re receiving stimulus funds during the 6-month period prior to bankruptcy, you want to know if those funds are added to your income averages. After all, it could mean the difference between qualifying for bankruptcy or not.

There’s good news regarding stimulus funds and CMI. Your stimulus funds are not included in your CMI calculations for Chapter 7. Accordingly, you also can not use anticipated stimulus funds when calculating your ability to re-pay creditors in a Chapter 13.

The Bankruptcy Estate

The second question to answer regarding stimulus funds is whether they are part of the Bankruptcy Estate. If an asset is part of the Bankruptcy Estate, then the bankruptcy trustee can pursue the asset in Chapter 7 unless you have a way to exempt it. If you have unexempt assets when filing a Chapter 7, you may decide to dispose of assets in an allowable way prior to filing, or to delay filing until the unexempt asset is otherwise addressed. Your bankruptcy attorney can assist with answering questions regarding reasonable planning prior to filing bankruptcy.

The Coronavirus Aid, Relief and Economic Security Act of 2020 (“CARES” Act) does not speak to the issue of whether funds received through the CARES Act are part of the Bankruptcy Estate. As a result, the safe approach is to assume the stimulus funds are part of the Bankruptcy Estate. This means you may be advised by your attorney to spend those funds on allowable expenditures prior to filing bankruptcy, or to use available exemptions to exempt the funds if you still have them in your possession at the time of your bankruptcy filing.

In Conclusion

While this may seem somewhat confusing, it is only one of many financial considerations your bankruptcy attorney will sort through with you prior to the filing of your case. Provided you’re aware of how the bankruptcy trustee will treat your assets, you can enter into bankruptcy without any surprises.

Speak With A Charlotte Bankruptcy Lawyer Today

Getting started with bankruptcy planning is easy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.

/by

Emergency Bankruptcy To Stop Foreclosure

, ,

Emergency Bankruptcy To Stop Foreclosure

Yes, you can file an emergency bankruptcy to stop a foreclosure. If you’re behind on your mortgage and your mortgage lender is about to sell your home in foreclosure, a Chapter 13 bankruptcy filing will freeze the foreclosure proceeding. Then, as long as you make your Chapter 13 payments as scheduled, your Chapter 13 plan will allow you to get caught up on the mortgage over the Plan period (typically 60 months).

What If The Sale Already Took Place?

In North Carolina, after a foreclosure sale, you have ten days within which you can file a bankruptcy to stop the foreclosure. If you have a court paper showing a sale date of January 1st, you would have 10 days after that date to file your Chapter 13 bankruptcy. Weekends and holidays are included in the 10 days, and if your 10th day falls on a weekend or holiday, you have until the next business day to file your Chapter 13.

Will My Mortgage Lender Object To The Bankruptcy?

Most mortgage lenders have no objection to a Chapter 13 bankruptcy. After all, it’s a court-approved plan to get caught up on the mortgage. The mortgage lender will file documents with the court laying out the balance owed on the mortgage and the amount you are behind (The “Arrears”). Your Chapter 13 bankruptcy lawyer will calculate your plan payments for you based on these figures as well as your monthly income and expense figures.

Even if the mortgage lender does object to the Chapter 13, there objection will not survive provided your Chapter 13 plan proposes to pay the normal monthly mortgage payment each month and make up the arrears over the course of the plan.

How Quickly Can I File An Emergency Bankruptcy?

Whether it’s a Chapter 7 or a Chapter 13, an emergency bankruptcy can be filed very quickly. You’ll need to take the mandatory online course required by the statute (it takes an hour), and you’ll need to meet with our firm to sign your bankruptcy petition prior to signing.

When you file an emergency bankruptcy to stop foreclosure, providing the court with the required documentation is very important. Typically, our firm will prepare for quite some time with a client before filing their bankruptcy. When we file an emergency bankruptcy, we have fourteen days to provide the court with the remainder of the information required for a successful bankruptcy. So, getting it filed is the first step, but be prepared to work quickly together to fulfill the remainder of the court’s requirements.

How Do I Get Started?

Getting started with an emergency bankruptcy to stop foreclosure is easy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.

/by

Filing A Small Business Bankruptcy

, , ,

Filing A Small Business Bankruptcy

Filing a small business bankruptcy in North Carolina is an endeavor which will relieve you of your personal obligations on business debt. For most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goals.

While Chapter 11 is designed for traditional business bankruptcy filings, it is an expensive bankruptcy option that costs debtors tens of thousands of dollars. There are times when a Chapter 11 is the appropriate avenue for a corporate entity to enter into bankruptcy and continue to do business. More often, in a small business bankruptcy setting, a Chapter 7 or Chapter 13 will serve to meet your goals, and save you thousands of dollars.

Debt With A Personal Guaranty

As part of preparing for bankruptcy, you must review your debt obligations with the help of your bankruptcy attorney. Specifically, it is important to distinguish between debt which is to the corporate entity only, and debt which includes a personal guaranty. The dissolution of the corporate entity serves to relieve the corporate entity of the obligation on the debt; the personal bankruptcy filing will serve to address the personal guaranty.

Anti-Bankruptcy Clauses In Contracts

Many corporate debt contracts contain language specific to bankruptcy. Those contracts often dictate that a bankruptcy filing will not serve to relieve the personal guaranty or other obligations to repay the debt. While this language is freely entered into by both parties signing the contract, courts have rules it to be in conflict with public policy. Our firm will defend any challenges to the discharge of your corporate debt, specifically challenges premised upon an anti-bankruptcy clause.

Profit and Loss Statements

Qualifying for Chapter 7 requires a thorough review and disclosure of your income for the 6-month window prior to the filing. When operating as a small business, debtors are typically not paid as W-2 employees. LLC members and partners take draws and often those draws differ dramatically from month to month, depending upon the profitability of the business. Additionally, while bankruptcy is available for debtors who qualify from an income perspective, you must demonstrate to the bankruptcy court your income, as defined by the bankruptcy court. This necessitates the submission of a profit and loss statement showing actual gross income, less actual expenses. Our firm will guide you through this process. We can help to create your profit and loss statement or advise a third party—typically an accountant—who you might retain to prepare it for you. For small businesses which have not had much income over the 6-12-month window prior to filing, often the profit and loss statement is easily created.

Call For A Consultation

We know the stress of running any small business. When you’re facing financial difficulties, it can be overwhelming. We’re here to help. Call us for a free consultation at 704.749.7747 or click HERE to make a simple request to be contacted. We will reach out to speak with you or schedule a time to speak. Your financially recovery is right around the corner, and we hope you choose to Recover With Us.

/by

5 Myths Surrounding Bankruptcy

,

5 Myths Surrounding Bankruptcy

Bankruptcy is surrounded by myths, and they keep eligible individuals from pursuing what can be an amazing way out of crippling debt and financial stress. You deserve freedom from the anxiety caused by the myths surrounding bankruptcy. We hope this article helps. And if you have any questions, we’re here to answer them. Just reach out to us.

#1 All Bankruptcy Filings Are The Same

To understand and debunk some of the myths about Chapter 7 bankruptcy, we must first understand how Chapter 7 bankruptcy differs from Chapter 13 bankruptcy. While both are consumer bankruptcy options, Chapter 7 bankruptcy is typically used in a situation where the client has limited income and assets and does not have the ability to pay back all or even some of their debt. Chapter 13 bankruptcy is a tool for catching up on a delinquent secured debt like a mortgage or car. It is also a compromise where you pay back some of your debt while completing a court-approved repayment plan.

#2 Bankruptcy Will Stay On My Credit Report Forever

While effects of a Bankruptcy on your credit report can vary due to the case, the credit reporting of a Chapter 7 bankruptcy lasts a maximum of ten years. Some credit reporting agencies remove the bankruptcy after seven years. Some of these credit report references to bankruptcy include trade lines that state that your account was included in a bankruptcy, and third-party collection debts, judgments, and tax liens discharged through bankruptcy. More importantly, your credit score and your ability to get a loan or credit card recovers much faster than this time frame. We see this with clients year after year.

#3 My Credit Score Won’t Improve Until The Bankruptcy Is Gone From My Credit Report

While your post-bankruptcy credit score will show a drop after filing, you will be surprised at how quickly your credit score begins to recover. One reason is that by way of bankruptcy, your debt to income ratio improves in your favor. Additionally, creditors are more likely to lend you money because they know you have no other debt, and they know you can’t file bankruptcy again. Often, the same creditors you included in your bankruptcy filing will offer you new extensions of credit shortly after you file.

Obtaining a secured line of credit and making payments on it, or taking out a new credit card and making payments on it, will help you to raise your credit score with the goal of hitting the range of 700-749 over time. Making on-time payments for all debt, adding and paying new credit, and keeping your credit card balances under a thirty percent utilization are all examples of ways to boost your post-bankruptcy credit score.

#4 I’ll Never Have Credit Cards Again

While we secretly hope this is true for you, we hope it’s because you choose to never have a credit card again. The truth is, as this article has indicated so far, you’ll be given lots of opportunities to have a credit card after filing for bankruptcy. Truthfully, credit cards are actually one of the best ways to build credit, and options for that post-bankruptcy do in fact exist.

Credit cards that require an upfront security deposit, are called secured credit cards and have a lower barrier of entry but allow you to spend and rebuild credit just like any other kind of credit card. After you make consistent payments on a secured credit card, you will see your credit score increase and other credit opportunities arise.

#5 I’ll Never Get A Home Loan After Filing Chapter 7

Similar to credit cards, when paid on time, loans help you to rebuild your credit score and certain loans are easier to receive after having filed bankruptcy. Credit builder loans, CD loans, or Passbook loans, are similarly secured with a deposit or collateral and will all help to rebuild your credit score. These loans are easier to procure due to the simple fact that the lender is protected in the event that you are unable to pay, which makes them a great opportunity to rebuild your credit scores in the meantime. If you’re repaying a vehicle loan, you’ll also see the benefits by way of an increase in your credit score.

Generally, at the two-year mark after filing bankruptcy, our clients who have diligently re-built their credit after bankruptcy, find they are eligible for a mortgage. A more conservative estimate would be two to four years; however, we receive so many phone calls at the two-year mark from clients who are excited because they are buying a home, that it’s worth mentioning here.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article regarding myths surrounding bankruptcy was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

 

/by

Who Pays For Physical Therapy After A Car Accident?

Who Pays For Physical Therapy After A Car Accident?

You didn’t ask to be in a car accident. Now you’re dealing with the aftermath—arguing with the insurance company, missing work due to injuries and doctor’s appointments, and possibly facing the inability to afford treatment. We help clients with these concerns every day in our practice, and we can help you as well.

If your car accident or slip and fall required a surgery, most likely you will need some form of physical therapy after a car accident and surgery. If you do not have health insurance, or if you have a high deductible, you may not be able to afford physical therapy. This conundrum presents numerous problems. First, your full recovery depends upon physical therapy. You won’t fully heal from the surgery without it. Second, if you have a personal injury claim, you deserve to not only be treated but also to have that treatment paid for by whoever caused the injury.

Physical Therapy On A Lien Basis

In North Carolina, there is a lien statute which relates to medical treatment provided in conjunction with a personal injury. While the language of the statute requires legal interpretation, it generally boils down to the fact that your medical providers (including your health insurance company) can place a lien against your injury proceeds. Your lawyer has an ethical obligation to obtain lien amounts and address them in your settlement. The upside of this rule is that quite often, you can find a physical therapist to treat you on a “lien basis”. This means the therapist will treat you and simply agree that they will wait to get paid until you reach a settlement.

You’ll Need An Attorney Letter Of Protection

If you find a physical therapist or chiropractor willing to work on a lien basis, they will most likely want to see a copy of your police report, and receive a letter from your personal injury lawyer indicating the lawyer represents you, and that the lawyer is protecting their lien in the personal injury settlement. This letter can be quickly drafted and faxed or emailed to the medical provider, so that treatment can begin or continue.

When Do You Pay For The Physical Therapy After A Car Accident?

Once you reach a settlement, your attorney will work with the physical therapist to negotiate their bill, if possible. The lien statute referenced above (NCGS 44-49 and 44-50) place limitations on the amount you must pay the medical provider from your settlement proceeds, and this will be a necessary component of the negotiation. Your personal injury lawyer will handle this for you and communicate with you regarding where every dollar of your settlement will go.

How Much Of My Settlement Will I Receive?

The answer to this depends of course on a few factors. First, how high your outstanding medical bills and liens are. Second, how much you receive at settlement. Lastly, the application of the NC lien statute to the settlement proceeds and liens will largely determine the amount which will go back to you from your settlement proceeds. Your attorney will address each of these concerns with you as your case progresses and you will have ultimate authority to settle the claim or refuse the offer of settlement. It’s your attorney’s job to help you understand how each decision affects you.

Speak With A Personal Injury Lawyer Today

If you would like to speak with an attorney about your personal injury case, we’re here to help. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Personal Injury Blog. Thank you for visiting the website—we hope it has been helpful.

/by

How Much Will My Chapter 13 Payments Be?

,

How Much Will My Chapter 13 Payments Be?

Determining how much your Chapter 13 payments will be is a complicated process that involves several components. Your bankruptcy attorney will gather numerous pieces of information from you in order to accurately propose a Chapter 13 plan to the court. If approved, your Chapter 13 payment will be set by an Order confirming the plan.

Your Payment Starts With Your Ability To Pay

Chapter 13 is distinguishable from Chapter 7 in that when you file Chapter 13 you are being asked to pay something back to your creditors over a 3 or 5 year period. If your current monthly income is greater than the applicable state median, you will have a 5-year plan. Most plans are 5 years. The burning question is HOW MUCH do I have to pay my creditors?

One premise of Chapter 13 is that the debtor must pay creditors whatever amount they are able to pay. More specifically, after the debtor takes their monthly income and subtracts all ongoing monthly expenses, the remainder is known as Net Disposable Income. This is the amount you should commit to creditors in your Chapter 13 plan. Your bankruptcy attorney will work with you to make sure you’ve taken all allowable expenses and deductions against income. This serves to lower the Net Disposable Income and in turn lowers the portion of your Chapter 13 payment going to unsecured creditors.

Items Which May Increase Your Chapter 13 Payment

Once you have calculated your Net Disposable Income, you have determined the floor or the lowest amount you can propose to repay to creditors. However, you must also consider assets and certain other priority debts, in order to complete the analysis. A debtor is only allowed a certain dollar amount of equity in particular assets (Home, Vehicle, etc.). If the debtor’s equity exceeds the allowable amount, then the debtor must propose a plan which accounts for that amount. The allowable amount of equity in the property is excluded from the bankruptcy estate by claiming your bankruptcy exemptions.

Example: Debtor owns a home worth $200,000.00. The debtor’s mortgage balance at the time of filing is $160,000.00. The debtor has $40,000.00 of equity. The allowable Homestead Exemption in North Carolina is $35,000.00. In this case, the debtor exceeds the allowable exemption by $5,000.00. As a result, the debtor must propose a plan that pays at least that amount to unsecured creditors, spread out over the 5 year plan period. $5,000.00/60 months = $83/mo. If the debtor’s Net Disposable Income is already $83/mo or higher, no adjustments need to be made. However, if Net Disposable Income is only $53/mo, the debtor would have to increase it to $83/mo.

In this instance, the ‘floor’ set by Net Disposable Income may need to be raised to accommodate the excess equity in the home. Below is an example where the debtor has a priority debt that must be paid in full. This can also affect the minimum monthly plan payment. Priority debts include but are not limited to: back child support owed, IRS debt less than 3 years old, NC Department of Revenue debt less than 3 years old, back property taxes owed, HOA dues owed at the time of filing.) The answer to the question “How much will my chapter 13 payments be” changes, depending upon the factors below.

Example: Example: Debtor has Net Disposable Income of $100/mo. However, the debtor also owes the IRS $5,000 from taxes less than 3 years old at the time of filing. As such, those taxes are priority debt and must be paid in full over the life of the plan. For a 5 year plan, the monthly payment on the IRS debt would come to roughly $83/mo. As the debtor already has Net Disposable Income exceeding $83/mo, the plan is fine at $100/mo. The bankruptcy trustee will send roughly $83/mo to the IRS and the remaining $17/mo to the unsecured creditors.

In a situation where the debtor has BOTH excess equities in property AND priority debt, you must apply both rules. The minimum monthly payment proposed must be enough to pay a) the excess equity over 5 years, AND in addition, must include enough money to pay the priority debt.

Example: Combining both examples above, the debtor has $5,000 in excess equity and an additional $5,000 in priority debt. As such, the plan must pay a total of $10,000 over the 5 year period. $10,000/60 months = $166/mo. As a result, no matter the Net Disposable Income of the debtor, it would be inappropriate to propose a monthly plan payment of less than $166/mo.

Other Factors Which Affect A Chapter 13 Plan Calculation

Vehicle Loan Balance–Typically, the balance on your vehicle loan will be scheduled to be paid evenly over the 60 month plan period. If you only have 2 years remaining on your vehicle when you file Chapter 13, this will result in a decrease in your car payment (spreading it out over 5 years instead of 2) which will help to absorb some of the potential increases discussed above.

Age Of Vehicle Loan–If your vehicle loan is older than 910 days at the time of filing, you can reduce the balance of the loan down to the Fair Market Value of the vehicle, and pay that entire balance over the 60 month plan period. This often results in a substantial “win” for the debtor and can make a Chapter 13 plan feasible.

Remaining Attorney Payments–The Western District of North Carolina sets the base fee for attorneys in Chapter 13 at $4,500 as of the writing of this article. If you pay your attorney $4,500 prior to filing, you will not have any attorney payments built into your payment. However, this is not an option for most clients. Supposing instead you pay $3,500 to your attorney prior to filing, this would leave $1,000 to be paid throughout the 60 month plan period.

Speak With A Personal Injury Lawyer Today

If you would like to speak with an attorney about your personal injury case, we’re here to help. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Personal Injury Blog. Thank you for visiting the website—we hope it has been helpful.

/by

How To Avoid Wage Garnishment – File Bankruptcy

, ,

How To Avoid Wage Garnishment – File Bankruptcy

If you need to avoid wage garnishment in North Carolina, filing bankruptcy is most likely your best option. While North Carolina limits the type of debts which can be garnished, if you want to avoid wage garnishment altogether, bankruptcy is an option which will halt wage garnishment under federal law.

North Carolina Types Of Wage Garnishment

Generally, North Carolina limits the type of debts that can be garnished. Child support, Student Loans, Taxes, Ambulance Bills, and Unemployment Over payments can be garnished. Additionally, if a general unsecured creditor obtains an out-of-state judgment, they may be able to garnish wages in North Carolina.

General Limitations On Wage Garnishment

North Carolina does limit the amount of your wages which can be garnished. Below are a few times of garnishments and the general limitations placed upon them.

The North Carolina Department of Revenue — (Taxes) can only garnish 10% of your gross wages.

Out of state creditors — can garnish 25% of your disposable income or the amount by which your disposable income exceeds 30 times federal minimum wages, whichever is less.

Child Support – can be garnished up to 50% of your disposable earnings.

Defaulted Student Loans – can be garnished for up to 15% of your disposable income.

How Can Bankruptcy Help With Wage Garnishment?

When you file bankruptcy, the Automatic Stay in bankruptcy prevents creditors from contacting you and attempting to collect on debt. Wage garnishment is of course an attempt to collect a debt. The court notifies your creditors about the filing of your bankruptcy, and they are bound to abide by the Automatic Stay unless they successfully apply for relief from the Automatic Stay. Most creditors do not pursue relief from the Automatic Stay.

Avoid Wage Garnishment With Chapter 7

If you file a Chapter 7, typically your Chapter 7 filing will only give you temporary relief from most of the types of debts which are associated with wage garnishment. The types of debt that can potentially be addressed in full with a Chapter 7 filing are: judgments from general creditors, tax debt older than 3 years old, judgments from mortgage and vehicle debt. While a Chapter 7 filing won’t address child support, student loans, or new tax debt, it will give you roughly a 4 month break from it. The reason is that most creditors simply wait for your Chapter 7 to close out and then begin to attempt to collect or garnish debt at that time. Many times, filing a Chapter 7 eliminates enough other debt that you can successfully address the debt which survives the Chapter 7. We’re happy to walk you through it.

Avoid Wage Garnishment With Chapter 13

Chapter 13 not only stops wage garnishment, but forces all garnishing creditors to allow you to propose a 5 year plan to repay that debt. Most of the time, paying that debt back over a 5 year period—with caps on interest and penalties—makes the debt manageable. In addition to helping you avoid wage garnishment, the Chapter 13 also forces vehicle lenders to lower their interest rate to the court-ordered “Till”rate which may be lower than you are paying on your vehicle loan currently. There are numerous other benefits to a Chapter 13, and if you reach out to us we can quickly help you decide if you should consider a Chapter 13 filing.

Bankruptcy Vs. Garnishment

In all but the most rare cases, the amount you will pay to file a bankruptcy will help you save thousands of dollars over wage garnishment. It also forces creditors to allow you to keep enough of your paycheck to live comfortably while ‘catching up’ on your debt in Chapter 13, or quickly eliminating it in Chapter 7.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

/by

Discharging Student Loans In 2019

Discharging Student Loans in 2019

I have created a Google Alert for Student Loan Crisis. Every day my inbox tells me about one or another tales of how unpayable student loans are the key stressors for Millenials and Generation Z. One of the best measures for the sense of where our country is going is to analyze trending cases in bankruptcy courts that consider whether to discharge student loans in bankruptcy.

As many of us know, the general rule is that student loans are not dischargeable unless the debtor can show that the loans impose an “undue hardship.” While the Bankruptcy Code does not define this phrase, most courts have adopted a three part approach known as the “Brunner Test” to determine whether a debtor’s repayment of student loans after bankruptcy constitute “undue hardship.” The three parts, all of which must be satisfied, are:

  1. Will repaying the loan force the debtor to live an existence below a minimum standard of living?
  2. Will this condition likely persist into the foreseeable future?
  3. Has the debtor made a good faith effort to repay the student loans?

While the U.S. Supreme Court has not stated that the Brunner Test is the sole applicable standard, it has become the widely acknowledged standard around the country. I’ve taken a look at ten of the most recent student loan opinions to see if we can draw any conclusions about national trends in discharging student loans in bankruptcy.

In re Halatek (Eastern District of North Carolina)

  • Amount of Loan: 114,783
  • Held: Although Chapter 7 debtor suffered from Hypermobile Ethles-Danlos Syndrome and narcolepsy, she was gainfully employed by the State of North Carolina in a tenured, non-legal position, earned $66,192 in salary in 2016, debtor could not meet the first prong of the Brunner test because she had the ability to make payments on her student loan debt, while maintaining a minimal standard of living, if she reduced her discretionary expenses.

Analysis: North Carolina is a low income state, and $66,192 (right around median for a family of three) seemed simply too high for this court to find that this debtor could eliminate her student loans, notwithstanding her debilitating illness.

In re Tinsley (New Jersey)

  • Held: 1) whether or not a debtor is eligible for a zero-dollar-per-month repayment plan is not outcome determinative as to the first prong of the Brunner test. If the court finds that a debtor has reasonable expenses that significantly exceed their income and they would be unable to pay any loan amount, then the first prong is satisfied, even if a zero-dollar-per-month repayment plan is an option. 2) Debtor does not satisfy second prong of Brunner test where debtor medical condition does not prevent her from maintaining full-time employment for a significant portion of the repayment period, debtor’s expenses will decrease dramatically for a significant portion of the repayment period of the student loans, and debtor failed to produce any evidence that showed how her student loans have created a “stigma” in her life and how that stigma will impact her for a significant portion of the repayment period of the student loans.

Analysis: the Court added a “stigma” gloss to the second Brunner prong where none had existed previously. Plus, the likelihood that expenses would decrease caused the court to refuse to discharge the student loans.

In re Quackenbush (Southern District of Mississippi)

  • Amount of loan: $30,809 and $7,760 in accrued interest
  • Held: Debtor could not survive DOE’s motion for summary judgement even though debtor was unemployed and supporting her mother and mentally disabled daughter where debtor did not produce evidence that her situation was likely to persist for a significant portion of the repayment period of her loans, or that she had made a good faith effort to repay.

Analysis: the evidence required to discharge the student loan must be applied to every prong of the Brunner test. Borrowers frequently run afoul of the third prong because they have been simply unable to make any payments at all.

In re Regan (New Mexico)

  • Amount of Loan: $50,000
  • Held: Debtor, a 62 year old with an annual income of $44,444 could not discharge loans under Brunner because under the first prong of the Brunner test, evidence of her financial condition established that she could maintain a minimal standard of living even if forced to repay her student loans under an income-based repayment plan and public service loan forgiveness program; if she made payments under an IBRP, took advantage of the PSLFP, and made 114 consecutive qualifying payments, the remaining balance of her student loan debt would be forgiven in nine years, when she was 72.

Analysis: This opinion demonstrates the bias against discharging student loans in bankruptcy. The income of $44,444 was below the state median income, even for a household of only one person.

In re Lozada (SDNY)

  • Held: debtor fails first prong of Brunner test where his expenditures indicated that he lived a comfortable lifestyle and the record did not reveal any efforts to minimize discretionary expenses. Also, debtor has at least $1,400 of surplus income that he could apply towards paying his student loans. Debtors’ charitable donations totaling more than $100,000 in the five years preceding his bankruptcy also weighed against him.

Analysis: This was a fairly easy decision. Surplus income of any kind is typically enough to defeat a request to discharge student loans in bankruptcy.

In re Kinney (Northern District of Iowa)

  • Held: Debtor’s cosigning of niece’s student loans, where debtor receives no educational benefit from these loans, weighs against prohibiting discharge for debtor, so long as debtor can otherwise satisfy the Brunner test.

Analysis: this decision makes a nuanced distinction between guarantying another’s student loans and obtaining student loans for one’s own benefit.

In re Metz (Kansas)

  • Amount of Loan: $67,277
  • Held: 59 year old single debtor who filed bankruptcy under Chapter 13 was entitled to partial relief under the Brunner test where, although she had an income of $43,000, she could not make minimum monthly payments of $564 while maintaining a minimum standard of living, had few if any prospects of earning a higher salary, and would have been required to pay to work until she was 84 to pay the entire debt.

Analysis: like other cases, the age and low relative income of the debtor entitled her to obtain relief from her student loans.

In re Menefee (Eastern District of VA)

  • Held: debtor failed to satisfy any prong of Brunner test where she failed to provide any evidence as to her current income and expenses or the amount of her student loan payment, and thus did not establish that she could not maintain a minimum standard of living.

Analysis: this case raises the question of debtor’s good faith in attempting to obtain student loan relief. Debtors bear the burden of establishing the right to a discharge in bankruptcy for student loans.

In re Pierson (Northern District of Ohio)

  • Held: 1) debtor could satisfy first prong of Brunner test notwithstanding in the IBR repayment program at a zero monthly payment requirement. 2) Debtor met second prong of Brunner test where debtor struggles with learning disabilities and bi-polar manic-depressive disorder and thus had limited future earning potential. 3) Debtor could satisfy third prong of Brunner test where he utilized administrative assistance such as requesting forbearance and did not seek discharge until 20 years after his education. Discharge granted.

Analysis: this case would provide the greatest hope for those who would seek to discharge student loans in bankruptcy. This debtor overcame two of the greatest hurdles facing such debtors: participating in an income based repayment program and seeking forbearance and deferment instead of outright making payments. This court certainly focused on the debtor’s long term mental health struggles.

 In re Richardson (Southern District of Georgia)

  • Held: debtor fails first prong of Brunner test where creditor shows that debtor could maintain minimal standard of living by limiting his retirement plan payroll deductions.

Analysis: voluntary deduction for retirement plans frequently interfere with a debtor’s efforts to discharge student loans or otherwise obtain bankruptcy relief. Courts frequently view such deductions as a debtor paying themselves before paying creditors. On the other hand, if a debtor can’t possibly save for retirement because he owes exorbitant student loans, then why is that not an undue hardship?

Conclusion: as much as we would like for bankruptcy courts to take up the mantle of addressing the huge social problem imposed by ruinous student loan debt, it appears almost certain that the final word must be made by Congress. However, if an enterprising attorney were to bring this matter to the Supreme Court who would articulate a standard that is less rigid than the Brunner Test, as traditionally applied by bankruptcy courts, that could open doors for huge change in the world of student loans and bankruptcy.

This article was contributed by Ronald J. Drescher. He can be reached at www.drescherlaw.com or 410.484.9000.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy or have questions about discharging student loans,  it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

/by

Can I File Bankruptcy Again?

, , ,

Can I File Bankruptcy Again?

If you’re thinking about filing bankruptcy again, you will need to know whether you received a discharge in your prior bankruptcy filing. Most of the rules regarding whether you can file bankruptcy again depend upon whether you received a discharge. If you’d like to speak with someone to get an answer, simply call us at 704.749.7747 or click HERE to request a free phone consultation.

If You Filed A Prior Chapter 7

If your prior bankruptcy was a Chapter 7, and you received a discharge, you must wait 8 years from the date you filed your previous case. After the 8 year mark, you can file Chapter 7 again in North Carolina.

If your prior bankruptcy was a Chapter 7 and you would like to file Chapter 13, you will need to wait 4 years after the filing of the Chapter 7.

If your did not receive a discharge in your prior bankruptcy filing, simply call us and we will pull your prior bankruptcy filing from the online database. We will be able to tell you when you are eligible to file bankruptcy again. If your prior case was discharged With Prejudice, then you usually only have to wait 180 days to file again. Your bankruptcy attorney may need to file a motion to put the Automatic Stay in effect for your new bankruptcy filing. This is an important step that needs to be taken if you’ve recently filed a bankruptcy which was dismissed.

If You Filed A Prior Chapter 13

If you received a discharge in your prior Chapter 13, you must wait at least 2 years after the date the first case was filed, if you want to file another Chapter 13. If you would like to file Chapter 7 after a successful Chapter 13, you must wait six years to file bankruptcy again. You will need to pass The Means Test in Chapter 7, and we will assist with that.

If you did not receive a discharge in the Chapter 13, and the court has not placed any restrictions on re-filing, then you can file a Chapter 7 immediately after the Chapter 13 is dismissed.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy again, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

/by