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When we file a Chapter 7 bankruptcy petition for an individual, clients often ask which assets they will be able to keep after the bankruptcy case is closed.Oftentimes, clients own interests in LLCs or partnerships and want to know if they will lose that interest in Chapter 7 bankruptcy.Forbes recently published an article by Jay Adkisson titled “Can an LLC Interest Owned by a Debtor Be Sold by the Bankruptcy Trustee?” In this well-written article, Mr. Adkisson analyzes a recent case of first impression in the Eastern District of Kentucky, captioned Business Aircraft Leasing v. Ultra Energy Resources LLC (In re Addington).The bankruptcy court held that in a Chapter 7 bankruptcy filing, a bankruptcy trustee can sell an economic right in an LLC member's interest. In the Addington case, Larry Addington filed for Chapter 11 bankruptcy, which was later converted to Chapter 7. He owned a 36% membership interest in a limited liability company called Ultra Energy Resources, LLC. The judge in the Addington case discusses that an LLC membership interest consists of a governance interest, which includes the right to manage the LLC, vote to admit members or dissolve the LLC, and the economic rights of an LLC, which are the rights to distributions of money or property from the LLC.The dispute in the case was whether the creditor who purchased the LLC interest from the Chapter 7 Bankruptcy Trustee acquired governance interests or economic rights. The LLC's position was that the purchaser had simply acquired economic rights, and the bankruptcy court, in a declaratory judgment, held that the purchaser had indeed only acquired economic rights, not governance interests.In reaching his decision, the Bankruptcy Judge analogized to a charging lien that a judgment creditor obtained on a debtor LLC member's interest. The Addington case is one of the first to involve the sale of a membership interest in an LLC by a Bankruptcy Trustee in a Chapter 7 proceeding.Mr. Adkisson, in his article, notes that the managers of a closely held LLC are unlikely to admit the purchaser as a member unless they know the purchaser will be friendly. A few comments based on our experience:1. If the LLC is a single-member LLC, the Bankruptcy Trustee will be able to sell the member's governance and economic interest.2. Whether a governance or economic interest can be sold will often depend on the terms of the Operating Agreement and state LLC law.Individuals or their advisors with questions pertaining to the sale of LLC member interests in a chapter 7 bankruptcy filing should contact Jim Shenwick, Esq.jhsJim Shenwick, Esq 917 363 3391 [email protected] Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!
OFFER IN COMPROMISE (“OIC”) FOR SBA EIDL LOANS UPDATEIs the SBA accepting OIC applications for SBA EIDL loans? If you search online, you'll find conflicting answers. Most results indicate noYesterday I (Jim Shenwick, Esq) called the SBA EIDL Customer Service and spoke with a representative who said the following:The SBA were doing offers in compromise on a case-by-case basis on a loan-by-loan basis”. They would provide me with no further information and my take away from the telephone call was that under the right circumstances and the right fact pattern the SBA would consider an OIC, however the SBA is looking for full repayment of SBA EIDL loans and they would be reluctant to accept discounted or reduced payments. Clients or their advisors with questions about SBA EIDL loans are encouraged to contact Jim Shenwick, Esq.Jim Shenwick, Esq 917 363 3391 [email protected] Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!
“Now I can’t even rent an apartment”
Chuck, not his real name, talked to me last month about filing bankruptcy. He’d been trying to “resolve” his debts through one of the newer debt settlement outfits, Five Lakes.
After 18 months in a debt settlement program, Chuck can’t even rent an apartment.
He had been paying Five Lakes for eighteen months and his credit score kept going down. Why was that?
Why Debt Settlement/Debt Consolidation Wrecks Your Credit
The big idea behind Five Lakes and others is that you stop paying your debts: “Making your creditors wait for payment encourages them” to give you a better deal: in theory. Of course every month you don’t pay, the creditors ding your credit with another delinquency. And when you reach a settlement–if you do–with the first one or two creditors, the others still aren’t getting paid. They still keep reporting you as late and keep dragging your credit score down further.
Each month you are late is reported as a delinquency in credit reporting vocabulary. And the delinquencies just pile up.
Bankruptcy Stops Credit Report Delinquencies
When you file bankruptcy, your creditors have to stop credit-reporting. That means you do NOT get his with a new late report delinquency every month. Your credit takes one last hit and that’s it. You can start the process of rebuilding your credit. That’s why studies show, most people experience an immediate improvement to their credit scores after filing bankruptcy.
As soon as the bankruptcy is over–usually three and a half months in a Chapter 7–you can get new credit cards and start building good credit, while your former problems fade into the past. In a debt settlement situation, those late payment keep chasing you.
In a few years after bankruptcy, your credit can be good as new.
The post Why is Bankruptcy Better for Your Credit Score than “Debt Consolidation” appeared first on Robert Weed Bankruptcy Attorney.
SBA ENDS THE HARDSHIP ACCOMMODATION PLAN FOR SBA EIDL LOANSEffective March 19, 2025 the SBA has ended the Hardship Accommodation Plan (“Hardship Plan”) for SBA EIDL Loans.The Hardship Plan allowed SBA EIDL loan borrowers to repay the SBA 10% of the loan payment due for a period of 6 months (with no default) to give the borrower breathing room to restructure or reorganize. Under the Hardship Plan, if a borrower's monthly payment was $2,000, they could pay the SBA $200 for a 6-month period. After 6 months, the payments increased to 20%, then 50%, then 70%, and finally 90% for 6-month intervals until the loan was repaid.Under the Hardship Plan, interest continued to accrue under the original loan payment terms, causing the balance due to pay off the loan to increase during the Hardship Plan.As we noted in a prior post, the SBA also eliminated the Offer in Compromise plan (https://shenwick.blogspot.com/2025/03/sba-does-not-allow-eidl-loans-to-be.html) Fewer options now exist for the struggling SBA EIDL loan borrower.Those options appear to be:1 Loan modification: Borrowers can request modified payment terms or extended repayment periods or negotiated repayment plans with the SBA.2. Hardship deferment: Borrowers experiencing economic challenges may be eligible for temporary payment deferrals.3 Full Loan Repayment from business or personal assets, if possible.4 Liquidation of Business Assets: Close the business or sell business assets and pay off or pay down the SBA EIDL loan with the sales proceeds. The SBA loan documents require that any business assets sold and subject to an SBA loan must be paid to the SBA at the time of sale. However, the borrower will remain liable for any deficiency owing after the paydown.5 Refinancing your existing SBA loan with a private lender and use the loan proceeds to pay down or payoff the SBA.6 File for bankruptcy. If the SBA EIDL loan exceeded $200,000 and an individual or entity guaranteed the loan, both the SBA borrower and guarantor may need to file for bankruptcy to discharge the SBA loan7 Default on the SBA loan and engage in Asset Protection Planning in case of legal action by the SBA or the Treasury Offset Program. At Shenwick & Associates, we can be retained to review the SBA Borrower & Guarantor financial information to determine the best course of action. Clients or their advisers with outstanding SBA EIDL loans who have questions about what they should do can contact Jim Shenwick, Esq to discuss their situation.Jim Shenwick, Esq 917 363 3391 [email protected] Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!
Chapter 7 income eligibility got slightly easier April 1, 2025
People making less than the median income have income eligibility to file Chapter 7 bankruptcy. Those numbers adjusted up, April 1, 2025. For Virginia, eligibility is automatic for singles under $77,420, family of 4 under $145,585.
What if I’m over the median income? You can still pass the “means test.”
You can still be eligible for Chapter 7 if you are over that median income cutoff. But you have to pass means test. The means test is a way of looking at your budget to see if you are legitimately broke.
For the means test, you need to budget carefully.
Here are some of the main budget items that can help you if you are over the median.
Child care
Help for elderly family members
Medical expenses, co-pays, prescriptions, dental work, etc.
Big car payment
Big mortgage payment
Living in a high rent county
If you are over the median income, really, really careful budgeting is required to show Chapter 7 income eligibility on the means test.
The post Chapter 7 income eligibility gets slightly easier appeared first on Robert Weed Bankruptcy Attorney.
SBA
DOES NOT ALLOW EIDL LOANS TO BE COMPROMISED THREW AN OFFER IN COMPROMISE
Many
clients have contacted our law firm seeking assistance in settling their
outstanding SBA EIDL loans through an offer in compromise (OIC).
Unfortunately,
the SBA's current position is that they do not allow EIDL loans to be settled
through an OIC. While the OIC program is available for other types of SBA
loans, EIDLs remain excluded from this option.
The
options to settle SBA loans are provided below.
1.
Hardship Accommodation Plan. The hardship accommodation plan lowers
monthly payments for 6 months, and then payments increase over a time.
2.
Loan modification: Borrowers can request modified payment terms or extended
repayment periods or negotiated repayment plans with the SBA.
3.
Hardship deferment: Borrowers experiencing economic challenges may be eligible
for temporary payment deferrals.
4
Full Loan Repayment from business or personal assets, if possible.
5
Liquidation of Business Assets: Close the business or sell business assets and
pay off or pay down the SBA EIDL loan with the sales proceeds. The SBA loan
documents require that any business assets sold and subject to an SBA loan must
be paid to the SBA at the time of sale. However, the borrower will remain
liable for any deficiency owing after the paydown.
6
Refinancing your existing SBAloan with a private lender and use the loan
proceeds to pay down or payoff the SBA.
7
File for bankruptcy. If the SBA EIDL loan exceeded $200,000 and an individual
or entity guaranteed the loan, both the SBA borrower and guarantor may need to
file for bankruptcy to discharge the SBA loan
8
Default on the SBA loan and engage in Asset Protection Planning in case of
legal action by the SBA or the Treasury Offset Program.
Clients
or their advisers with outstanding SBA EIDL loans who have questions about what they should do can contact Jim Shenwick, Esq
to discuss their situation.
Jim
Shenwick/Shenwick & Associates
Jim
Shenwick, Esq 917 363 3391 [email protected]
Please
click the link to schedule a telephone call with me.
https://calendly.com/james-shenwick/15min
We
help individuals & businesses with too much debt!
How To Join A Meeting On Zoom? | Quick Start Guide
The bankruptcy trustee hearings are on Zoom. If you are not a regular Zoom user, this page shows you what to do. For the instructions on how to join a meeting with Zoom, just click on the link above. Or click on the picture.
The post How to Use Zoom with a Meeting ID and Passcode appeared first on Robert Weed Bankruptcy Attorney.
When a favor turns into a financial burden, what happens next?
Co-signing a loan might be doing someone a big favor by helping them get a car, a credit card, or even their first home. But what happens if they can’t keep up with the payments? You could end up responsible for the debt, turning that favor into a financial burden. If bankruptcy is involved, a co-signed debt bankruptcy Medford attorney can help you understand your rights and explore ways to protect yourself.
If the borrower files for bankruptcy, you do not just get to walk away. Depending on the type of bankruptcy, you could still be responsible for the debt. Oregon’s laws explain exactly how this works, but understanding your rights ahead of time can save you from a financial nightmare. This article will break it all down so you know what to expect and what steps you can take to avoid a tough situation.
Quick Summary:
- Co-signing a loan makes you legally responsible for the debt if the main borrower stops making payments. This applies to car loans, credit cards, mortgages, and more. Even if you never use the loan, lenders can come after you for full repayment.
- Bankruptcy does not automatically protect co-signers from financial responsibility. If the borrower files for Chapter 7, creditors can still demand payment from the co-signer. Chapter 13 may offer temporary protection, but the co-signer could still be liable if the borrower fails their repayment plan.
- Co-signers can face serious financial consequences, including collection calls, lawsuits, and damage to their credit. A lender can sue for unpaid debts, leading to wage garnishment or asset seizure. Knowing your rights can help prevent unexpected financial hardship.
- There are ways to protect yourself if a borrower files for bankruptcy. Staying informed, negotiating with lenders, and checking for co-signer release options can help limit your risk. Setting aside money for potential payments and seeking legal advice can also provide financial security.
What It Means to Co-Sign a Loan
Helping someone get approved for a loan might seem like a kind and simple gesture. But when you co-sign, you are not just vouching for them, you are legally responsible for the debt if they cannot pay. If they miss payments or stop paying altogether, the lender can turn to you for the full amount. This applies to personal loans, car loans, credit cards, mortgages, and sometimes even student loans.
In Oregon, like most states, co-signers are subject to “joint and several liability”. This means the lender does not have to go after the main borrower first. They can demand payment from either of you, depending on who is more likely to pay. Even if you never used the money or benefited from the loan, you are still responsible for the debt. Before agreeing to co-sign, it is important to know exactly what you are signing up for.
Understanding Bankruptcy in Oregon
Bankruptcy can be a way for people to get out of overwhelming debt, but it does not always protect co-signers. In Oregon, the two most common types are Chapter 7 and Chapter 13. Chapter 7 wipes out many debts but may require selling off certain assets to pay creditors.
Chapter 13, on the other hand, sets up a repayment plan so debts can be paid over time. Each type has different rules on who qualifies and what property can be kept. While bankruptcy can give the main borrower a fresh start, co-signers may still be responsible for any remaining debt.
How Bankruptcy Affects Co-Signers in Medford, Oregon
If the main borrower files for bankruptcy, the co-signer does not automatically get the same protection. What happens next depends on the type of bankruptcy and how the debt is handled. Knowing the differences can help co-signers plan ahead and avoid unexpected financial trouble.
Co-Signer Liability in Chapter 7 Bankruptcy
Chapter 7 bankruptcy clears the borrower’s responsibility for the debt, but it does not erase the co-signer’s obligation. Once the borrower files for bankruptcy, here’s what the co-signer can expect:
- Creditors can still demand full payment from the co-signer, even though the borrower is no longer responsible. If the co-signer cannot pay, the lender may take legal action or send the debt to collections.
- The co-signer’s credit may take a hit if payments are missed or the debt is not paid off. Late payments, collection activity, or lawsuits can all show up on their credit report, making it harder to get approved for future loans.
- The “automatic stay” only protects the borrower, not the co-signer. While bankruptcy pauses collection efforts against the borrower, lenders can still go after the co-signer for the remaining balance. This means the co-signer could start receiving collection calls or legal notices.
- Once the stay is lifted, creditors can take legal action against the co-signer to recover the unpaid debt. This could lead to wage garnishment, lawsuits, or even asset seizure, depending on the situation.
Co-signing a loan comes with serious financial risks, especially if the borrower files for Chapter 7 bankruptcy. Understanding these risks can help co-signers prepare for what might happen next.
Co-Signer Protections in Chapter 13 Bankruptcy
Chapter 13 bankruptcy provides some protection for co-signers through a structured repayment plan, but this protection is not automatic. It only works if the borrower successfully completes their plan. Here’s what co-signers need to know:
- A “co-debtor stay” temporarily shields co-signers by stopping creditors from demanding payment while the borrower follows the repayment plan. However, this protection can be lifted if the lender requests it or if the borrower falls behind on payments.
- The protection only works if the borrower finishes the plan. If they fail to make all the required payments, the co-signer is still responsible for any remaining debt. This could lead to collection calls, legal action, or damage to the co-signer’s credit.
- Reaffirmation agreements can keep the co-signer legally tied to the debt. If the borrower agrees to continue paying a specific debt during bankruptcy, the co-signer remains liable as well. This means the lender can still pursue the co-signer if payments are missed.
- The repayment plan could keep the co-signer tied to the debt longer. Since Chapter 13 plans last three to five years, co-signers may be financially connected to the loan for a long time, increasing their risk if anything goes wrong.
While Chapter 13 offers more protection than Chapter 7, co-signers should still be prepared for potential financial consequences if the borrower struggles to complete their repayment plan.
How Co-Signers Can Protect Themselves
Co-signing a loan is a big responsibility, and if the main borrower struggles with payments or files for bankruptcy, you could end up paying the price. Taking the right steps early can help you avoid financial trouble and limit your risk.
Stay Informed
Keep in touch with the borrower and check in on their financial situation. If they start missing payments, knowing early gives you time to figure out what to do next. Even a simple conversation can help you prepare for any potential issues.
Negotiate with Lenders
Some lenders may offer new payment plans, settlements, or loan modifications to make things easier. It never hurts to ask if there are options to reduce your risk. You might be able to work out a solution that keeps both you and the borrower from falling deeper into debt.
Look Into a Co-Signer Release
Some loans allow co-signers to be removed after a certain number of on-time payments. Check with the lender to see if this is possible so you are not stuck with the debt. Getting released from the loan means you no longer have to worry about the borrower’s financial decisions affecting you.
Budget for Potential Liability
Since you are legally responsible for the debt, it is a good idea to set aside some money just in case. Even saving a little at a time can help if the borrower stops paying. A safety net can prevent a missed payment from turning into a bigger financial issue.
Seek Legal Advice
A Co-signed debt bankruptcy Medford attorney can explain your rights and options. If things get complicated, professional guidance can help you avoid financial trouble. Understanding your legal standing can make a big difference in how you handle the situation.
Being a co-signer can put you in a tough spot, but knowing your options and taking the right steps can help you avoid financial trouble. Whether it’s working out a deal with the lender, setting up a backup plan, or getting legal advice, having a clear strategy can give you more control over the situation.
Talk to a Co-Signed Debt Bankruptcy Medford Attorney Today!
If a co-signed loan is turning into a financial burden, you don’t have to deal with it alone. A Co-signed debt bankruptcy Medford attorney at Northwest Debt Relief Law Firm can help you understand what bankruptcy means for you and what steps you can take to protect yourself. Whether you’re being contacted by creditors or just worried about what happens next, we’re here to help.
We offer free debt solution consultations to go over your options and find the best way forward. Call us today to get the guidance you need and start taking back control of your finances!
State of Missouri v. Trump, No. 24-2332 (8th Cir. 2025): SAVE Student Loan Plan
The Eighth Circuit Court of Appeals ruled against the Biden administration’s Saving on a Valuable Education (SAVE) plan, declaring that the Department of Education exceeded its authority in implementing broad student loan forgiveness through an income-contingent repayment (ICR) plan.
Legal Basis for Ruling:
- Lack of Statutory Authority: The court found that 20 U.S.C. § 1087e(d)(1)(D), which authorizes ICR plans, does not permit loan forgiveness. Instead, repayment plans must be structured to ensure borrowers eventually repay their full loan balance, not receive forgiveness after a set number of years.
- Comparison to Previous Loan Plans: Other repayment programs, such as Income-Based Repayment (IBR), explicitly include forgiveness provisions in their statutory language. Congress did not provide similar language for ICR plans, meaning the Secretary of Education does not have the authority to create forgiveness within ICR.
- Major Questions Doctrine: The court applied the major questions doctrine, ruling that loan forgiveness on this scale requires clear congressional approval, which was absent.
- Biden v. Nebraska Precedent (2023): Similar to the Supreme Court’s decision striking down the HEROES Act loan forgiveness plan, the court ruled that the executive branch cannot unilaterally cancel debt without explicit legislative authorization.
Said the Court:
On the Lack of Statutory Authority for Loan Forgiveness: “The statute’s text and structure require ICR plans to be designed for a borrower to pay his or her loan balance in full through payments that can fluctuate based on income during the payment term. The Secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid.”
On the Application of the Major Questions Doctrine: “We are hard-pressed to conclude that Congress, by directing the Secretary to enact a repayment plan with varying payments based on income over a period not exceeding twenty-five years, believed it authorized the Secretary to wipe out any remaining principal or interest of any borrower in as few as ten years of low or no payments.”
On the Need for Congressional Authorization: “Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it—explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance. The statutory text enabling the creation of an ICR plan provides no comparable language.”
As a result, the court invalidated the SAVE plan in its entirety and blocked efforts to restore previous ICR-based forgiveness provisions.
Image courtesy of Flickr and Brittany Hogan.
Many clients have contacted our law firm asking how to sell a business subject to an SBA EIDL loan. There are two scenarios. In the first, the sales proceeds are sufficient to pay off the SBA loan (the easier scenario). In this case, one is required to contact the SBA and obtain prior approval, pursuant to SBA loan documents. In the second scenario, the sales proceeds are not sufficient to pay off the SBA loan (the more difficult and complex scenario), resulting in a shortfall ("Shortfall"). With respect to the Shortfall scenario, the Borrower/Seller must do the following: 1. Provide the SBA with information about the proposed sale (prior to closing), 2. Submit the required SBA documents for the sale to the SBA, 3. Send the SBA the proposed Sales Agreement, 4. Provide the SBA with a business valuation or appraisal of the business being sold, 5. Provide the SBA with financial statements for the business being sold, and 6. Provide the SBA with a proposal for handling the loan shortfall (an Offer in Compromise, payment by the Guarantor, Loan assumption by the Buyer, etc.).The proposed Sales Agreement should include a contingency clause stating that the sale is subject to SBA approval. Obtaining SBA approval can take months and may require negotiations with the SBA.Clients or their advisors having questions about the sale of a business subject to an SBA loan should contact Jim Shenwick, Esq.
Jim Shenwick, Esq 917 363 3391 [email protected] Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!
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Learn more about how Bankruptcy works and what you need to know.