Bankruptcy Court Online » chapter 7

How Chapter 7 Can Help You Pay Your Non-dischargeable Student Loans

Jonathan — Sun, 15 Apr 2012 11:19:46 +0000

In my last post, I argued that the current Bankruptcy Code standard for discharging student loans is unduly harsh and burdensome. Currently student loan debt – and this includes private student loans, government backed student loans, parent incurred loans, and loans paid to schools that have closed down before the student received training or a degree – may not be discharged in bankruptcy unless the debtor can show “undue hardship.”

The courts have read undue hardship to mean some reason beyond the debtor’s control that would preclude repayment. This usually means that there must be some medical reason that the debtor will not ever be able to return to work. Underemployment is specifically not a reason to allow undue hardship. As far as the courts are concerned, debtors who are healthy always have opportunities to increase their income so that they can pay their student loan debt, whether payment comes next year or in 20 years.

It seems oddly inconsistent for the Bankruptcy Code to allow debtors to discharge income tax debt solely based on its age ( income tax debt that is 3 or more years old may be discharged) but for all intents and purposes will not allow for the discharge of student loans despite the fact that:

student loans are typically incurred by 17 year olds with little understanding of what real world debt means
colleges and student loan lenders have less disclosure requirements than credit card lenders
loans remain non-dischargeable even if the school goes out of business and does not provide the education
parents who sign for loans have no recourse even though they did not get the benefit of the education
colleges have used the wide availability of government guaranteed loans to boost tuition costs at many times the rate of inflation
colleges bear no responsibility for offering courses of education that are unlikely to result in salaries sufficient to pay the loans

Bankruptcy – Understanding Chapter 7 Bankruptcy

Bankruptcy — Fri, 16 Mar 2012 15:51:54 +0000

By Sergei Tokmakov -

This article covers the main stages of the Chapter 7 bankruptcy process.

Chapter 7 bankruptcy basics

Chapter 7 the most frequently filed type of bankruptcy. It is also sometimes called “liquidation bankruptcy” because it will liquidate most, or all, of your debt. Your nonexempt property will be sold by the bankruptcy trustee in order to pay the proceeds, if any, to the creditors. You will be able to keep your exempt property. To begin Chapter 7 bankruptcy, you have to get a long list of forms from the bankruptcy court and fill them out. After you have filed the forms with the bankruptcy court, the automatic stay kicks in.

The automatic stay

The automatic stay precludes your creditors, secured and unsecured, from trying to collect what you owe them. It’s called “automatic” stay because court issues this injunction on its own initiative without you even asking for it. This is to give you some peace of mind and to ensure that the bankruptcy trustee, and not your creditors, will decide what you get to keep. Even non-dischargeable loans are subject to the automatic stay.

Mandatory credit counseling

Within the 180-day period prior to filing, you must receive mandatory credit counseling form an approved nonprofit agency and file a certificate of completion with the bankruptcy court. Credit counseling will last about an hour, the agent will go over your budget with you and give you suggestions and possible alternatives to bankruptcy. You don’t have to follow the advice given by the agency but you do have to obtain the certificate of completion. If the agency does come up with an alternative plan for you, you have to file it with the rest of your paperwork. You don’t have to participate in counseling if your disability prevents you from doing so.

The Meeting of creditors (“341 meeting”)

After you’ve filed all the required paperwork with the bankruptcy court, the court will send out a notice to all of your creditors in order to give them an opportunity to file objections and attend a scheduled hearing. This notice is called “341 notice,” which is a reference to Section 341 of the bankruptcy code. At the meeting, the bankruptcy trustee will ask you a few questions about your paperwork. For example, how you came up with your property value figures, whether this is your first time filing for bankruptcy and whether all the information in your papers is true and accurate. The meeting typically lasts a few minutes. Creditors rarely attend the meeting of creditors.

The Discharge

Approximately two months after the meeting of creditors, you will receive a Notice of Discharge from the bankruptcy court. You will then be free to move on with your life. If you receive proceeds from divorce, insurance or inheritance within 180 days of your filing date, you must report to the bankruptcy court. Failure to do so may result in bankruptcy court revoking your bankruptcy discharge.

To find out more, please contact San Diego business and employment attorney Sergei Tokmakov. Call now (858) 205-5665 for a free consultation or business and employment law info.

Article Source: http://EzineArticles.com/?expert=Sergei_Tokmakov
http://EzineArticles.com/?Bankruptcy—Understanding-Chapter-7-Bankruptcy&id=6850156

Bankruptcy – Understanding Chapter 7 Bankruptcy is a post from: Bankruptcy Court Online

Chapter 7 Petition Bankruptcy Explained

Bankruptcy — Thu, 08 Mar 2012 16:10:21 +0000

By Andrew Sarski -

When someone needs to file for bankruptcy protection, he or she needs to make one initial decision – the type of bankruptcy that should be filed that’s right for the situation. There are choices for the consumer, namely petitions under either Chapter 7 or Chapter 13 of the United States Bankruptcy Code.

Below is a brief explanation of how filing a Chapter 7 bankruptcy works, but regardless of your financial situation, you need to seek legal help to make sure that your petition proceeds properly.

Chapter 7 Explained

If a consumer files a Chapter 7 petition, he or she is filing what’s known as a ‘liquidation bankruptcy.’ This is because in certain respects, the petitioner will be liquidating a majority of the assets held at the time of the filing, but not all of them, as will be explained below. The steps for filing a Chapter 7 bankruptcy petition are as follows:

Gather your financial information – When you file a Chapter 7 bankruptcy petition, you will need to present a complete schedule of your assets and your liabilities to the Bankruptcy Court for the Trustee to review. This information is the foundational basis for filing in the first place – you’ll need to show that your liabilities exceed your assets.
File your petition – After you’ve organized all of your financial information, you need to put the documentation together and file it with the Bankruptcy Court. Assuming the initial petition is reasonable, the court will usually respond by serving a Stay of Execution on the creditors named in your petition, which is basically an order from the court that requires the creditors to cease with collection efforts.
Go to your hearing – The next step in the process is going to a hearing with the Bankruptcy Trustee, and your creditors have the option of attending as well. At this time, the Trustee will ask you on the record if your petition is accurate and will note any objections your creditors may have.
Wait for the Order of Discharge – Assuming there are no problems with your petition, the court will review the information and issue an order discharging your debts. In order to comply with this procedural step, you’ll need to liquidate your assets minus any exemptions. When this is complete, your bankruptcy is complete and your debts are eliminated.
Note on exemptions – Exemptions are values placed on certain property that cannot be liquidated, as the Bankruptcy Court does not want to leave petitioners completely destitute. What this means is that you are allowed to keep certain assets up to a certain value including a house, a car, any materials you need for work and even pets, among other things. Different states have different exemption levels, so you’ll need to get those amounts clarified before moving forward.

While filing a Chapter 7 Bankruptcy Petition may seem quite simple, it’s actually a process that requires careful management and organization steps. In order to make sure that your petition goes well, contact the Arizona bankruptcy lawyers at Phillips & Associates today to get this process started.

Article Source: http://EzineArticles.com/?expert=Andrew_Sarski
http://EzineArticles.com/?Chapter-7-Petition-Bankruptcy-Explained&id=2454436

Chapter 7 Petition Bankruptcy Explained is a post from: Bankruptcy Court Online

When Enough is Enough – Choosing to File For Bankruptcy

Bankruptcy — Tue, 16 Aug 2011 14:52:08 +0000

By Joseph Devine -

The popular culture and overwhelming desire to live up to one’s financial obligations can — as noble as that goal is — tremendously complicate an individual, family, or organization’s efforts to eliminate debts and proceed in a more fiscally responsible manner. By creating the impression that the inability to meet payment schedules constitutes some sort of personal or moral failing, these cultural barriers can cause people to strain themselves physically, emotionally, and monetarily well beyond the point of reason. Though bankruptcy is not simply an easy out and should not be looked at as an escape valve at the first sign of financial distress, there are many circumstances under which it represents the best and most sensible option.

The reality is that the majority of those who are driven to consider bankruptcy end up in dire straits due to significant changes that are beyond their own control. These tend to be dramatic shifts in one or more areas of life, including divorce, the loss or reduction of employment, or affliction with a substantial physical or mental illness. It is important that you bear this in mind as a factor in your own financial struggles so that you do not judge yourself harshly and that you can maintain an accurate perspective on the appropriateness of bankruptcy in your present condition.

Signs and Choices

Knowing when the time has come to draw the line and to take the difficult emotional step of filing for bankruptcy protection depends on maintaining an awareness about the specifics of your debt situation. This means taking a long, hard, and honest look at the terms and rates of your varied repayment agreements and realistically determining how quickly you can pay the debt off on your own. In performing such calculations, it is essential that you take into account all the necessary and reasonable incidental expenses so that you can accurately project your capacity to make payments.

Then weigh the following signs that bankruptcy may be right for you:

If you discover that your debt load is too high to pay off in a reasonable time frame
You have many dependents
Cash in accounts, including savings, is limited

A skilled and experienced bankruptcy attorney can help you to identify the best chapter under which to file for your particular debt distribution. Most likely you would file under:

Chapter 7
Chapter 11
Chapter 12
Chapter 13

For the Help You Need

If you are unsure what to do next, contact the Arizona bankruptcy lawyers of the Harmon Law Office, L.L.C.

Joseph Devine

Article Source: http://EzineArticles.com/?expert=Joseph_Devine
http://EzineArticles.com/?When-Enough-is-Enough—Choosing-to-File-For-Bankruptcy&id=2974785

When Enough is Enough – Choosing to File For Bankruptcy is a post from: Bankruptcy Court Online

The Broken Bank – Choosing Bankruptcy

Bankruptcy — Wed, 27 Jul 2011 14:30:37 +0000

By Joseph Devine -

The majority of American families find themselves in the unpleasant life situation of living from paycheck to paycheck and this makes them incredibly vulnerable to financial collapse in the event of a medical emergency, job loss, or other event that disrupts income or creates a dramatic increase in the level of one’s obligations. Typically, when one enters into debt and establishes repayment agreements with his or her creditors it is with an optimistic view that does not take into account the potential for these problematic occurrences to arise. As a consequence it may become impossible to keep up with the demands of your creditors and filing for bankruptcy protection may offer the best solution.

Though nobody sets out with the intention to fall behind on the repayment of his or her debts, there comes a point when scrambling and struggling to make ends meet causes more harm than it accomplishes good. It can be difficult to determine where that transition takes place, but a continual inability to make minimum payments on time and an abundance of collection calls and letters are some indicators that a substantial change is necessary.

Advantages of Bankruptcy

Even when filing for bankruptcy protection offers the best and swiftest path to the resolution of an overwhelming and unmanageable debt load, many people are still hesitant to file. Part of the reason for this is the longstanding negative public perception and judgment of those people who seek the advantages offered by the provisions of the United States Bankruptcy Code. But there are potentially adverse health effects, devastating and irreversible strains placed on relationships, and other troubling consequences associated with needlessly enduring a high stress debt situation.

Depending on the form of bankruptcy protection that you seek, you will be subject to different requirements and the procedural handling of your case will vary, though effectively all of the options will serve to somehow ease your terms of repayment of debts. Some of the advantages of a filing include:

Granting an extended period of time to make payments (Chapter 13)
Offering the opportunity to restructure repayment agreements or businesses (Chapters 11/12)
Forgiveness and discharge of debts (Chapter 7)
Automatic stay of collection efforts and creditor contact (Most chapters)

For More Information

Choosing which form of bankruptcy will be the most beneficial for your situation requires a consultation with a skilled and experienced attorney.

For more information, contact the Arizona bankruptcy lawyers of the Harmon Law Office, L.L.C.

Joseph Devine

Article Source: http://EzineArticles.com/?expert=Joseph_Devine
http://EzineArticles.com/?The-Broken-Bank—Choosing-Bankruptcy&id=3530846

The Broken Bank – Choosing Bankruptcy is a post from: Bankruptcy Court Online

We’ve Moved!

Nolo’s Bankruptcy & Foreclosure Blog — Thu, 02 Jun 2011 18:41:23 +0000

Our new home is http://blog.nolo.com/bankruptcy/.

How Does Bankruptcy Work? The Truth Behind Freeing Yourself From the Aggravation of Economic Failure

Bankruptcy — Tue, 31 May 2011 13:53:32 +0000

By Deborah B. Hall -

Struggling to keep your finances under control may not be a possibility for many of you during this time of economic stress. For those of you wanting to answer the question “how does a bankruptcy work?”, keep on reading this article.

It’s tough being in a situation where you feel you’re not in control, but how you got into this mess is not as important as learning to get out of it. To find out the best way for you to deal with this type of situation its best for you to have a free consultation with someone who has experience in dealing with circumstances like this.

Because there are currently 3 types of bankruptcy to be filed: Chapter 7, Chapter 11 or Chapter 13. By speaking with a specialist you’ll be able to learn exactly which chapter will be best utilized for your business and / or personal financial situation. Understanding which chapter to file could mean the difference between having your creditors getting part or all of your assets. You may also find yourself lucky enough to be free of your financial burden completely.

Are you still asking yourself how a bankruptcy works? I have to repeat this information to be sure you understand how important it may be to have an idea of what property may be exempt from your creditors. You may not have to lose everything you own and you may actually be able to keep some of the things you value most. The difference between Chapter 7 and Chapter 13 could mean creating a plan to repay your debt or being released from your debt and starting fresh. Please understand you’ll have an easier time dealing with this situation if you are aware of what you’ll be letting go off and the stress of moving forward could be easier to deal with.

Another thing you may not yet understand is that although your financial burden may be eased after you file for bankruptcy, you’ll have to prepare for having this on your credit report for at least 10 years. For most families who prepare for this in advance, this may not be an issue. If you can plan together to support each other during this time then it should be easier to deal with. If you find you’ll have to go bankrupt to survive, I can tell you from personal experience, the time does go by fast and there should be credit options available for you to help rebuild your credit as soon as your bankruptcy is approved and closed.

Hopefully, you now have some answers to how a bankruptcy works. I’m sure you have more to learn so start today by doing some online research. I know bankruptcy is unpleasant and irritating but peace of mind is within your reach.

How You Can Get a Free Consultation
The sooner you file the sooner you can begin rebuilding your credit. CLICK HERE have your questions answered by an expert in the field of bankruptcy. They are my #1 recommendation and since the bankruptcy evaluation is free, you have nothing to lose.

The road to financial freedom and recovery is closer to you than you think.

Article Source: http://EzineArticles.com/?expert=Deborah_B._Hall
http://EzineArticles.com/?How-Does-Bankruptcy-Work?-The-Truth-Behind-Freeing-Yourself-From-the-Aggravation-of-Economic-Failure&id=3865135

How Does Bankruptcy Work? The Truth Behind Freeing Yourself From the Aggravation of Economic Failure is a post from: Bankruptcy Court Online

Protection From Garnishment for Social Security, Veterans Benefits

Nolo’s Bankruptcy & Foreclosure Blog — Thu, 12 May 2011 17:58:49 +0000

A new treasury rule, effective May 1, 2011, will provide more protection to receipients of federal benefits from garnishment of their bank accounts.

Garnishment and Federal Benefits: The Basics

If a creditor gets a judgment against you, it has various tools to collect on that judgment. One tool allows the creditor to garnish (grab the money in) your bank account. But there are limits to garnishment. Judgment creditors cannot grab funds that come from certain sources, including some types of federal benefits such as Social Security, Supplemental Security Income, veterans benefits, and a few others.

Although these types of funds cannot be seized by creditors, in practice, when banks got a garnishment order in the past, they often froze all funds in the account (up to the amount of the debt), without regard to whether the funds were protected from garnishment. This means the bank accountholder would not be able to access those funds for weeks or months. The accountholder could object to the garnishment of the protected funds to prevent the bank from turning them over to the judgment creditor. But many people were unable to complete the paperwork and procedure to do so, and so lost funds that never should have been seized.

The New Rule: The Onus is on the Bank

The new rule puts the onus on the banks. Banks receiving garnishment orders must now determine if the bank account has protected federal benefits that have been electronically deposited into the account within the previous two months. If the bank discovers that there are protected funds, it cannot include those funds in the account freeze.

What This Means for Accountholders

Federal benefits received and deposited in a bank account via paper check are not protected by this new rule. Nor are funds received (even if received electronically) more than two months prior to the garnishment order. However, the regular state procedures for challenging a garnishment order will still be available for these types of funds. Federal benefit recipients currently receiving paper checks should consider switching to electronic deposit of their benefits.

For More Information

If you receive federal benefits and think you might need protection from bank garnishments, be sure to read about the nitty, gritty details of this new rule (this post just covers the very basics). For the short term, you can get an excellent summary of the new rule, as well as recommendations for how beneficiaries of federal benefits can best protect themselves, from the National Consumer Law Center at http://shop.consumerlaw.org/pdf/nclc-rpts-repo-jan-feb-2011.pdf.

By Guest Blogger Kathleen Michon

The New Bankruptcy Law “Means Test” Explained in Plain English

Bankruptcy — Mon, 02 May 2011 14:58:12 +0000

By Charles Phelan -

With the new bankruptcy law in effect since October 17, 2005, there is a lot of confusion with regard to the new “means test” requirement. The means test is used by the courts to determine eligibility for Chapter 7 or Chapter 13 bankruptcy. The purpose of this article is to explain in plain language how the means test works, so that consumers can get a better idea of how they will be affected under the new rules.

When most people think of bankruptcy, they think in terms of Chapter 7, where unsecured debts are normally discharged in full. Bankruptcy of any variety is a difficult ordeal at best, but at least with Chapter 7, a debtor was able to wipe out their debts in full and get a fresh start. Chapter 13, however, is another story, since the debtor must pay back a significant portion of the debt over a 3-5 year period, with 5 years being the standard under the new law.

Prior to the advent of the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” the most common reason for someone to file under Chapter 13 was to avoid the loss of equity in their home or other property. And while equity protection will continue to be a big reason for people to choose Chapter 13 over Chapter 7, the new rules will force many people to file under Chapter 13 even if they have NO equity. That’s because the means test will take into account the debtor’s income level.

To apply the means test, courts look at the debtor’s average income for the 6 months prior to filing and compare it to the median income for that state. For example, the median annual income for a single wage-earner in California is $42,012. If the income is below the median, then Chapter 7 remains open as an option. If the income exceeds the median, the remaining parts of the means test comes into play.

This is where it gets a little bit trickier. The next step in the calculation takes income, less living expenses (excluding payments on the debts included in the bankruptcy), and multiplies that figure times 60. This represents the amount of income available over a 5-year period for repayment of the debt obligations.

If the income available for debt repayment over that 5-year period is $10,000 or more, then Chapter 13 will be required. In other words, anyone earning above the state median, and with at least $166.67 per month of available income, will automatically be denied Chapter 7. So for example, if the court determines that you have $200 per month income above living expenses, $200 times 60 is $12,000. Since $12,000 is above $10,000, you’re stuck with Chapter 13.

What happens if you are above the median income but do NOT have at least $166.67 per month to pay toward your debts? Then the final part of the means test is applied. If the available income is less than $100 per month, then Chapter 7 again becomes an option. If the available income is between $100 and $166.66, then it is measured against the debt as a percentage, with 25% being the benchmark.

In other words, let’s say your income is above the median, your debt is $50,000, and you only have $125 of available monthly income. We take $125 times 60 months (5 years), which equals $7,500 total. Since $7,500 is less than 25% of your $50,000 debt, Chapter 7 is still a possible option for you. If your debt was only $25,000, then your $7,500 of available income would exceed 25% of your debt and you would be required to file under Chapter 13.

To sum up, first figure out whether you are above or below the median income for your state – median income figures are available at http://www.new-bankruptcy-law-info.com. Be sure to account for your spouse’s income if you are a two-income family. Next, deduct your average monthly living expenses from your monthly income and multiply by 60. If the result is above $10,000, you’re stuck with Chapter 13. If the result is below $6,000, you may still be able to file Chapter 7. If the result is between $6,000 and $10,000, compare it to 25% of your debt. Above 25%, you’re looking at Chapter 13 for sure.

Now, in these examples, I have ignored a very important aspect of the new bankruptcy law. As stated above, the amount of monthly income available toward debt repayment is determined by subtracting living expenses from income. However, the figures used by the court for living expenses are NOT your actual documented living expenses, but rather the schedules used by the IRS in the collection of taxes.

A big problem here for most consumers is that their household budgets will not reflect the harsh reality of the IRS approved numbers. So even if you think you are “safe,” and are able to file Chapter 7 because you don’t have $100 per month to spare, the court may rule otherwise and still force you into Chapter 13. Some of your actual expenses may be disallowed.

What remains to be seen is how the courts will handle cases where the cost of mortgages or home rentals are inflated well above the government schedules. Will debtors be expected to move into cheaper housing to meet the court’s required schedule for living expenses? No one has any answers to these questions yet. It will be up to the courts to interpret the new law in practice as cases proceed through the system.

Charles J. Phelan has been helping consumers become debt-free without bankruptcy since 1997. A former senior executive with one of the nation’s largest debt settlement firms, he is the author of the Debt Elimination Success Seminar™, a five-hour audio-CD course that teaches consumers how to choose between debt program options based on their financial situation. The course focuses on comprehensive instruction in do-it-yourself debt negotiation & settlement designed to save $1,000s. Personal coaching and follow-up support is included. Achieves the same results as professional firms for a tiny fraction of the cost. Visit http://www.zipdebt.com/seminar.php for more information.

Article Source: http://EzineArticles.com/?expert=Charles_Phelan
http://EzineArticles.com/?The-New-Bankruptcy-Law-Means-Test-Explained-in-Plain-English&id=74968

The New Bankruptcy Law “Means Test” Explained in Plain English is a post from: Bankruptcy Court Online

How and When to Reopen a Bankruptcy Case

Nolo’s Bankruptcy & Foreclosure Blog — Tue, 26 Apr 2011 18:26:41 +0000

Sometimes people want to reopen a closed bankruptcy case because they failed to invoke important procedures while their bankruptcy case was open.

Fortunately it's usually possible to reopen the bankruptcy and play catch-up. Common reasons for wanting to reopen a bankruptcy case include:

failing to timely file an Official Form 23 (pre-discharge counseling certification)
failing to name an important creditor or list valuable property, or
failing to take necessary steps to remove a judgment lien from real estate.

The process for reopening a bankruptcy case involves two steps.

Step One: Ex Parte Motion to Reopen. The first step is what's known as an ex-parte motion to reopen the case. This is a request to the judge that the case be reopened without giving advance notice to the creditors or scheduling a hearing. The paperwork, which consists of the motion or request, and an order granting the request, is pretty simple and widely available, both in Nolo's How to File for Chapter 7 Bankruptcy, by Albin Renauer, Steve Elias, and Robin Leonard, and various bankruptcy lawyer websites.

Step Two: Request for the Desired Action. The second step is to request (by motion and order) that the judge allow the desired action, for instance the removal of a judicial lien on real estate, or the entry of an order of discharge.

The fee for reopening a bankruptcy case is $274, so it's obviously less expensive to get everything done while you case is open. However, if you are trying to remove a lien worth many thousands of dollars, or asking for a discharge an expensive student loan, the fee to reopen the case is relatively unimportant.