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A Chapter 13 Bankruptcy can last anywhere fromm 36 to 60 months. Three to five years is a considerable amount of time and a lot of things can change. There are a number of issues that may affect your bankruptcy. Some of the most common changes that need to be addressed are:1. Change in Income. Over the course of your bankruptcy you may find that you change jobs, become employed when you previously were not, or get a promotion or pay raise. Any change in income should be reported to your attorney, regardless of whether it is a pay increase or decrease. You attorney may advise that you need to amend certain schedules and/or amend your Chapter 13 repayment plan. 2. A need to replace a vehicle arises. Your vehicle may break down, or perhaps it is just time to replace your current vehicle. If possible you should speak with your attorney before a new vehicle is an absolute necessity. The steps your attorney will need to take depend on the situation. If you are purchasing a new vehicle outright, free and clear of loans, you may need to explain where the funds for the vehicle came from. If you want to purchase a vehicle with a loan your attorney will need to file a motion to incur debt. You will have to show that you can afford your plan payment and the vehicle. A motion has to be filed with the court and you must allow at least 21 days for objections. If there are not any objections your attorney will file an order with the court allowing the purchase of a vehicle. If your previous vehcile was being paid through your chapter 13 repayment plan you and your attorney may need to amend your plan to reflect the changes.3. If you become entitled to receive a lump sum of money or property. You could become entitled to receive money for a variety of reasons, including an inheritance, proceeds from a lawsuit or settlement, cashing out a 401k. This list is not all inclusive. If you receive a sum of money for ANY reason you should contact your attorney. Generally, if you receive a sum of money while in a Chapter 13 that will have to be turned over to the trustee to be distributed to your creditors. Generally, this will be added to your plan base and may mean that you are paying off more of your creditors.This is not an all inclusive list. If something changes while you are in a bankruptcy you should contact your attorney. If you have questions, or would like to schedule a consultation, please contact a St. Louis Bankruptcy Attorney Today.
Last week, I came across an article in the Washington Examiner while I was riding the metro to work. This article noted that residents of Maryland carry more student loan debt than any other state in the country at $33,087. Virginia ranked sixth at $30,855. The average is $29,088. Compared to the debt load I will be carrying due to law school, these numbers actually seem rather modest to me, but they still go to show that student loan debt is on the rise, especially in this geographic region. I try to put my thoughts of future student loan payments at ease by reminding myself that I am getting a degree in a (hopefully) lucrative field, but it is not only law students who are racking up substantial amounts of student debt. The debt, of course, can get crippling for young graduates. In connection with this, I have heard many espouse the false statement that student loans cannot be discharged in bankruptcy. The statement is false for its overbreadth; while student loans generally cannot be discharged in bankruptcy, the Bankruptcy Code does contain an exception in certain situations.
To explore this, I ask that you open up your copy of the Bankruptcy Code to section 523(a)(8). It reads:
“A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt — unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for — an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or an obligation to repay funds received as an educational benefit, scholarship, or stipend; or any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual.”
So what does this mean? Probably the two most important words in that paragraph are “undue hardship.” It’s the key to this whole thing. The Bankruptcy Code does allow individuals to discharge their student loan debt; they just have to prove that they have an undue hardship.
What does undue hardship mean? First, I’ll tell you what it does not mean. I recall once hearing a former Bankruptcy Judge discuss an individual who attempted to have his student loans discharged in a case before him. This individual was a dentist. When said Judge asked him why a man with a good job and (presumably) good earnings would have an undue hardship in paying his student loans back, he responded that it was too difficult to balance paying off his student loans with the payments for his new expense sports car (I think it was a Porsche).
The judge did not consider this to be an undue hardship.
I should mention before I go further that I was inspired to write this blog in part because of an excellent podcast I recently listened at the American Bankruptcy Institute’s website (www.abiworld.org). I recommend that you check it out. Said podcast discussed the different tests that the Circuits use to determine what constitutes undue hardship. Since I suspect that most people reading this live within the Fourth Circuit (Virginia, Maryland, West Virginia, North Carolina, and South Carolina), I’ll discuss that rule first, which also happens to be the majority rule in the United States. The Fourth Circuit, like most other Circuits, has adopted the rule from the 1987 case of Brunner v. New York State Higher Education Services Corp., decided in 1987. Brunner contains a three-prong test to determine whether a debtor in bankruptcy meets the test for undue hardship:(1) “that the debtor cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the loans;”(2) “that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans;” and(3) “that the debtor had made good faith efforts to repay the loans.”
Under Brunner, a debtor must satisfy all three of those qualifications in order to qualify for undue hardship. There are some additional factors that courts use in making these determinations; for example, did the debtor successfully graduate from her program, or does she simply have looming loans from four years’ worth of college and no degree? Can the debtor pay back at least a portion of the loans? What are the debtor’s career prospects and earning potential?
Not all courts have used this test, though. The Eighth Circuit (Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) instead uses a totality of the circumstances test to determine whether a debtor would have an undue hardship in paying off educational loans, which is obviously a less strict test than the majority of courts use.
For whatever reason, a good portion of the population seems to believe that there is no way that student loans can be discharged in bankruptcy, but 523(a)(8) and cases modeled after Brunner clearly state the contrary. Interestingly, before the current Bankruptcy Code was passed in 1978, there was no bankruptcy statute which limited the ability to discharge student loans. Don’t be mistaken though: although it is indeed possible to discharge student loans in bankruptcy, it is by no means an easy thing to do. Debtors who plan on attempting to do so would be ill-advised to buy expensive automobiles beforehand – remember, Brunner talks about a minimalstandard of living.
Restrictive as it may be, I agree with the participants from ABI’s podcast – it is a good thing that some form of discharge from student loans exists under the Bankruptcy Code. A test such as the one used in the Eighth Circuit would no doubt be more useful to the debtor in bankruptcy, but in the current economy, some form of discharge for student loans is essential. By this, I am speaking in part about the new wave of for-profit universities which do just at their name indicates – try to make a profit, which is necessarily at the expense of the students. Unfortunately, these students all too often find themselves in tremendous debt, with degrees in areas which are not overly marketable in the first place, and even less so in an economy with an 8.1% unemployment rate.
Please let me know what you think. I hope I was thorough enough to give a clear understanding as to how the undue hardship exception works. Next week, I’ll be writing about the ability to discharge medical malpractice debts, based largely off the Supreme Court’s 1998 decision of Kawaauhau v. Green. I promise I will talk about things besides discharge after that. Thanks for reading.
J.P.
Richmond, VA-based Suntrust Mortgage will pay out $21 million to more than 20,000 African-American and Hispanic home loan borrowers to settle a federal government suit charging discriminatory mortgage pricing from 2005 to 2009. The lawsuit charged Suntrust with violating the Fair Housing Act and Equal Credit Opportunity Act.
This settlement comes on the heels of a settlement last December by Countrywide Financial Corp. and subsidiaries for $335 million for similar loans made between 2004 and 2008. Currently under investigation by the Department of Justice is Wells Fargo & Co.
"At the core (of the suit) is a simple story: If you are African-American or Latino, you likely paid more for a SunTrust loan than equally or similarly qualified white borrowers," Thomas E. Perez, assistant U.S. attorney general for the civil rights division, told the Richmond Times-Dispatch in a May 31, 2011conference call. "You paid what amounted to a racial surtax," ranging from hundreds to thousands of dollars per borrower," he told the newspaper.
The problem arose because of the way loan officers and mortgage brokers were incentivized, according to the lawsuit. The discriminatory charges (probably "yield spread premiums") boosted the commission for the loan agent when he or she could obtain an inflated price for a loan. Furthermore, the bank gave the loan officers and brokers free reign to do so by giving them broad discretion on prices beyond what should have been charged based on the customer's credit profile alone.
The investigation took two and half years and involved the review of more than 850,000 residential loans. Under the terms of the settlement, Suntrust will hire an independent administrator to contact the victims. Mailings are expected to begin at the end of this year. Suntrust admitted no wrong-doing.
The payout will average about $1,000 per person. However, in the opinion of this author, that will not nearly compensate the actual loss to many of the victims. Our law office has seen many who had homes with equity, refinanced during the height of the market, and then ended up losing both the equity and the home upon the collapse of the economy.
It's a sad state of affairs.
Richmond, VA-based Suntrust Mortgage will pay out $21 million to more than 20,000 African-American and Hispanic home loan borrowers to settle a federal government suit charging discriminatory mortgage pricing from 2005 to 2009. The lawsuit charged Suntrust with violating the Fair Housing Act and Equal Credit Opportunity Act.
This settlement comes on the heels of a settlement last December by Countrywide Financial Corp. and subsidiaries for $335 million for similar loans made between 2004 and 2008. Currently under investigation by the Department of Justice is Wells Fargo & Co.
"At the core (of the suit) is a simple story: If you are African-American or Latino, you likely paid more for a SunTrust loan than equally or similarly qualified white borrowers," Thomas E. Perez, assistant U.S. attorney general for the civil rights division, told the Richmond Times-Dispatch in a May 31, 2011conference call. "You paid what amounted to a racial surtax," ranging from hundreds to thousands of dollars per borrower," he told the newspaper.
The problem arose because of the way loan officers and mortgage brokers were incentivized, according to the lawsuit. The discriminatory charges (probably "yield spread premiums") boosted the commission for the loan agent when he or she could obtain an inflated price for a loan. Furthermore, the bank gave the loan officers and brokers free reign to do so by giving them broad discretion on prices beyond what should have been charged based on the customer's credit profile alone.
The investigation took two and half years and involved the review of more than 850,000 residential loans. Under the terms of the settlement, Suntrust will hire an independent administrator to contact the victims. Mailings are expected to begin at the end of this year. Suntrust admitted no wrong-doing.
The payout will average about $1,000 per person. However, in the opinion of this author, that will not nearly compensate the actual loss to many of the victims. Our law office has seen many who had homes with equity, refinanced during the height of the market, and then ended up losing both the equity and the home upon the collapse of the economy.
It's a sad state of affairs.
My Dad has really had his hands full - he’s been an incredible caregiver to my Mom who unfortunately has the dreaded disease Alzheimer’s. He finally hired Judy to clean once a week for a couple of hours and she has also helped care for Mom with love and kindness.
Judy, hard working, a single mom, cleaning houses and waitressing to help support her daughter get through school so she can provide her young twins with a better life. Along the way, Judy made some financial decisions that didn’t pan out and now she’s in over her head. Judy owes thousands to unsecure creditors. I received a call from my Dad explaining how Judy went to a lawyer to dicuss bankruptcy and the lawyer said she didn’t qualify for a Chapter 7 because she owns 2 cars. Judy’s daughter drives the 2nd car so she can get to and from school and take care of her twins. The legal advice Judy received from a Florida attorney during her free consultation was that she couldn’t file a Chapter 7 which was $1500 plus filing fees but she could file a Chapter 13 pay $400 upfront and then she’d have to pay approximately $300 per month for 36 months to the Chapter 13 Trustee. The lawyer never mentioned that his fees were to be paid from the $300 per month. My Dad wasn’t quite sure what was wrong with the advice she received but he wanted to repay Judy for all her kindness so he called me. I took down the facts and after going over her situation with a qualified bankruptcy attorney (my husband) the advice she received was not in Judy’s best interest. Judy qualified for a Chapter 7 – the downside of a Chapter 7 is she must pay for her filing & legal fees upfront – but her overall cost is thousands less than a Chapter 13, in her case $10,800 vs. $1500. I asked her who she saw and this lawyer also practices family law, personal injury and bankruptcy. Not the best choice. So, was the legal advice based on greed or just lack of knowledge? I went online and found her a qualified bankruptcy attorney.
The decision to file bankruptcy is serious and so should your choice of attorney. My free unsolicited advice – any qualified bankruptcy attorney will offer a free initial consultation – so get a second opinion and please consider hiring only an experienced bankruptcy attorney – preferably Board Certified.
No wonder there are so many negative jokes about lawyers.
Answer: YES!!
Bankruptcy is a scary wo
rd to many because: it's something you will never recover from; you'll never buy a home or a car again; you will have to surrender all of your assets and be left with nothing. Good reasons to be afraid, however the above statements could not be more wrong. They are inaccurate and only a part of the stigma that has been created for Bankruptcy.
If you are in jeopardy of losing your home, car, or being sued by a creditor Bankruptcy (Chapter 7 or Chapter 13) is a solution for these problems. The Bankruptcy Code was created to give individuals some protection from their creditors. If you come into my office with an already low credit score you can expect to see an increase in your credit score within the first year of filing. You will also be able to rebuild your credit and find financing again. The most important thing of all is that you have an immediate solution which will allow you to live comfortably without harassing creditors banging at your door, calling you at home, at work or even calling your friends and relatives. Bankruptcy is not the end of the world; it's the beginning of a new chapter. Bankruptcy (Chapter 7 or Chapter 13) coupled with a better understanding of managing your finances can provide you with a fresh start that you had always hoped for. Before you fall for the stigma of Bankruptcy seek the advice of a qualified Bankruptcy Attorney and let them guide you to the happy life you deserve.
Thanks for taking the time to check out a blog whose topic probably seems boring and depressing to a lot of people. My goal here is to show that bankruptcy can actually be very practical and interesting, and for many people it instills a sense of relief, rather than depression.
Just to make it clear, I am an individual, not a bank. I am also a law student, in the summer before my 3L year at the Catholic University of America's Columbus School of Law in Washington, D.C. Unfortunately, I seem to be among the minority of students who have an interest in the topic of bankruptcy, but I have truly come to enjoy it as an academic and career interest; the other area of law in which I have substantial interest is the often-related field of tax law.
My goal is to make this blog relatively devoid of legalese, and accessible to those without a knowledge of bankruptcy specifically, or law generally. The blog will not be carefully cited with footnotes throughout. I want to expose people generally to relevant, practical, and current topics having to do with bankruptcy, and show that it is worth the time to read about. Do I expect that many people will read this? Probably not. But at least I can try.
For those who do read this though, please keep in mind what I wrote above: I am a law student. I am not an attorney. Please do not substitute my writings for consultation with an attorney, which is a highly-advised course of action in the often complicated world of bankruptcy. I make no warranties as to the accuracy or completeness of the information provided, and no attorney-client or other relationship is being created, and I do not have the intent to plagiarize any information.
With that being said, there are some very basic bankruptcy concepts that should be useful as you are reading. With only a few exceptions (such as determining state property law for exemptions from a bankruptcy estate), Bankruptcy Law is federal law. Article I, Section 8 of the Constitution lists the power of Congress to make "uniform Laws on the subject of Bankruptcies throughout the United States," as an enumerated power. The Bankruptcy Code is Title 11 of the United States Code, and contains several different Chapters; people often ask me what the different Chapters mean, often enough in fact that that is probably the most common aspect of bankruptcy law about which I am asked.
Chapters 1, 3 and 5 are not mentioned in daily conversation as much as some of the latter Chapters, but they contain general information, instructions on case administration, and information on some of the parties to a bankruptcy case: the creditors and the debtor (the bankrupt person). Though it is difficult to pick out only a couple fundamental terms, I should mention that at the moment a debtor files for bankruptcy, all of his or her nonexempt property becomes part of a bankruptcy "estate," and an automatic stay is in place - creditors are instantly prohibited from attempting to collect on their debts.
Chapter 7 is liquidation. This applies to both individuals and business entities. A business entity may end its operations, or an individual debtor may have the assets in his estate sold off to satisfy part of the debt owed to his or her creditors. It is, by far, the commonest form of bankruptcy.
Chapter 9 is municipal bankruptcy. I must confess that it is an area in which I know little, as it was not heavily discussed in my bankruptcy class, and I have not encountered it in my independent studying.
Chapter 11 is the form of bankruptcy that likely gets the most media attention - reorganization. This is often discussed in conjunction with the bankruptcies of major corporations (General Motors), and lately with several different Roman Catholic Dioceses. It can also be used by individuals, though - Mike Tyson filed for Chapter 11 in 2003. Here, I should mention that some people have come to me with the notion that all people who file for bankruptcy are "poor." This is not necessarily true; it just means that they are insolvent. Basically, this means one of two things: either their liabilities exceed their assets, or they are unable to pay their debts as they come due.
Chapter 12 is a relatively new Chapter which provides for debt adjustments for family farmers and family fisherman. It was made permanent in 2005 by the ultra-important Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
Chapter 13 provides for debt adjustment for individuals with regular income. It is not open to business entities. It is meant to be attractive to individuals in that a Chapter 13 debtor will get to keep her assets (her home, in particular), and will pay a portion of the debt off to her creditors over either a three- or five-year period, depending on the circumstances. BAPCPA further provides a "means test," in which debtors with a certain amount of income will be barred from proceeding under Chapter 7, and will instead have to use Chapter 13. The Bankruptcy Code has a preference for Chapter 13.
Chapter 15 is for cross-border cases. This is another area not covered at length in my bankruptcy class, but one I am studying independently at the moment. It is modeled after the United Nations Commission on International Trade Law (UNCITRAL) of 1997.
With the (very) basics out of the way, I plan on adding a new blog entry on a weekly basis. Those entries will, of course, have more specified topics than the current one. Next week I plan on writing about the ability to discharge student loan debt in bankruptcy, in which I hope many will take an interest. I was inspired about that topic because of a recent podcast I listened to from the American Bankruptcy Institute.
So until next week (or whenever I decide to write again), thanks for reading, and please come back for more insolvency enlightenment!
J.P. Morgan
Since we practice law in El Paso, Texas, home of Ft. Bliss, one of the largest military bases in
the USA, we represent many Officers and Enlisted Soldiers. We see lots of prospective clients who are currently in the military and have moved to El Paso from all over the world. For many of these soldiers the stress of moving around, being deployed and all the other surprises that life brings has created a financial strain for them. Several of my clients in the military were afraid to file for fear of getting in trouble with their Chain of Command or losing their security clearance. Actually, we have seen many enlisted soldiers who were sent to us by their commanding officers. It is actually preferred by the military that the soldier’s finances are in order and that they are not in jeopardy of being sued due to defaulting on debts. In order to get your security clearance it is necessary for your financial situation to be manageable. Bankruptcy (Chapter 7, Chapter 13) is considered taking control of the situation. If you are in the military and are in fear of the consequences of falling behind on your debts or your debts are unmanageable – Bankruptcy (Chapter 7, Chapter 13) is a viable option for you.
When filing for bankruptcy a petition must be filed. If the debtor has an attorney the attorney generally fills out the petition based on information provided by the client. The attorney will then meet with the client to have the individual(s) review and sign the petition. While the attorney does fill this out, the debtor(s) are responsible for the information. It is very important that the individual is open and honest with the attorney. It is also very important that the debtor carefully reviews the petition to make sure that all information is accurate and disclosed. If a debtor is unsure of whether an asset should be disclosed it is always better to discuss the matter with an attorney who can give proper legal advice. The debtor will also attend a creditors meeting. The bankruptcy trustee will ask if all information is accurate and all assets and debts have been disclosed. If there is anything missing this is the debtor's opportunity to disclose the information. If information is disclosed at the creditors meeting the schedules filed with the bankruptcy petition will likely need to be amended to reflect that information.In the event that a debtor does not disclose all information on the bankruptcy petition a number of things can happen. Failing to disclose information is considered fraud. Bankruptcy proceedings are federal matters, and are subject to investigation by the United States Trustee and the Federal Bureau of Investigation. Fraud, or attempted fraud, is punishable by fines and/or incarceration in a federal prison.If a debtor fails to disclose creditors that creditor may not be discharged as they did not receive notice and did not have an opportunity to be heard at the creditors meeting. If a debtor realizes that a creditor was omitted the debtor should amend his/her schedules to reflect that information as soon as possible.If a debtor fails to disclose assets a number of things can happen. Depending on the asset the schedules can be amended. If a debtor fails to disclose an asset the trustee can object to exemptions being applied. If the asset is large, or worth any sum of money, the trustee can hold the case open or require the debtor to convert their case. At this time the debtor may be able to pay the trustee for the property, but if that is not an option, may be required to turn over the property. Once a Chapter 7 case is determined to have assets the debtor may not be able to voluntarily dismiss the bankruptcy proceeding. If you have questions about this, or would like to schedule a consultation, contact a St. Louis Bankruptcy Attorney Today.
I have been working with people who have filed bankruptcy (Chapter 13) for about three years now. I never really understood the stress and hardship that bankruptcy can put on a family. It has made me more aware of how to deal with my own finances and to appreciate what I have.
Lifestyle changes can be hard especially when you are used to a particular lifestyle. When you are faced with having to choose between paying your mortgage vs. tuition for a private school, I‘d like to think paying your mortgage wins every time. However, time and time again people continue to maintain the lifestyle they had before they filed bankruptcy. It's sad to say but sometimes you have to reevaluate your priorities. Changing your lifestyle to live within your means does not make you any less of a person or a bad parent; it simply makes you a responsible person looking to build a bright future for you and your family. If people continue to live their life as if society cares what material possessions you own then chances are you will be visiting your bankruptcy attorney again for more help.
Many of our clients have changed their lifestyles once they have filed. I am proud to have helped many through their transition because frankly, I tell them verbatim what I have written. Many clients have thanked me for my 'tough love advice'. Helping people makes my job rewarding because I have been able to successfully communicate that life after bankruptcy is simply a change in mindset.
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