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Preparing for Personal Bankruptcy in Texas

December 31st, 2020 at 10:50 pm

TX bankruptcy lawyer, Texas chapter 7 attorney, The decision to file for personal bankruptcy is not one that is easily made. Moreover, the days, weeks, and months following the decision can also be difficult, as there may be feelings of fear or concern. Then there is still the stress of preparing for the bankruptcy process. The following may be able to help alleviate some of that stress and provide guidance on how to find the assistance you need.

Start by Contacting an Attorney

While there are many steps to take during the bankruptcy process, your first should be to contact an experienced bankruptcy lawyer. Not only does this help you prevent missteps during the bankruptcy process, but it can also expedite the next steps. By contacting a lawyer, you can get you on your way to less stress from the creditor calls and collection letters.

Cancel Your Automatic Payments

If you are like most consumers, you have automatic payments that are drafted from your account. Some might be for subscriptions while others might be with creditors, all should be eliminated. This can help you start to step forward and manage your debt more responsibly. It also gives you more control over what you are paying in the weeks leading up to the bankruptcy filing.

Start Working on Your Budget Now

Although you will have opportunities to develop a sound budget, the best time to implement one is right at the start. A budget gives you the power to start watching what you are making and what you are paying out. Ultimately, this helps you determine which bankruptcy option may be most suitable for your situation. Further, it gives you the chance to start practicing the skills you will need during and after the bankruptcy process has ended.

Watch Out for Frozen Funds, Seizures, and Repossessions

While the bankruptcy process does stop the collection process, there is still a lot that can happen up to the date you file. For example, your creditors may attempt to freeze your bank account to gain access to your funds. Further, it is important to understand that bankruptcy does not guarantee you will be able to keep certain assets that are on a lien. Mortgages, car payments, and other loans with collateral are all prime examples of assets that could be seized or repossessed.

Why Choose Our Experienced San Antonio Bankruptcy Lawyer?

With more than 20 years of experience, the Law Offices of Chance M. McGhee is a firm you can trust to assist your bankruptcy concerns. We provide not just counsel for the process, but also guidance for the future. Our skilled Texas bankruptcy attorney will give you the tools you need to make the most of your fresh start. Learn more about how we can assist with your case by calling 210-342-3400. Free consultations are available.

 

Source:

https://www.kiplinger.com/slideshow/credit/t025-s001-things-to-know-before-filing-for-bankruptcy/index.html

Will Bankruptcy Wipe Out All of My Personal Debts?

December 15th, 2020 at 1:25 pm

debtThe United States is a notoriously consumeristic society. Having good credit is a necessity to buy a home and a reliable vehicle. Credit must be built, often through the usage of credit cards and the ability to repay the credit card debt. Sometimes, however, we accumulate debt and get in too far over our heads. Other times, a major unforeseen life event occurs—one which we are unprepared to handle financially. When this happens, filing for bankruptcy may help struggling individuals and families. When considering bankruptcy, the first question on many minds is, “Will it get rid of all of my personal debts”?

Understanding Bankruptcy

Bankruptcy is a federally approved process through which an individual or a company can reduce their debt. Those who are authorized for the process may have debts written off or repaid under a new agreement. The method used depends directly on the type of bankruptcy approved. The most typical forms of the process are Chapter 11 for businesses or Chapter 7 or Chapter 13 for private consumers, although others are available under appropriate circumstances. These chapters refer to the specific section of the United States Bankruptcy Code that will apply in a given case. Meanwhile, while the process is underway, all collection activities related to your debts—including lawsuits and foreclosure proceedings must stop.

Will All Debts Be Cleared?

If you are wondering whether bankruptcy resets your credit, enabling you to begin as though the debt never occurred, the answer is “no.” Filing for bankruptcy allows those who meet eligibility requirements to rid themselves of some but not all debt. Financial obligations that do not typically qualify to be wiped clean are child support, alimony, taxes, student loans, and secured debt. Although they may not be totally discharged, some may be eligible for a restructured payment plan. Some of the most common discharged liabilities include:

  • Unsecured debt
  • Credit card balances
  • Income tax debt
  • Medical bills

Why Might You Choose Not to File Bankruptcy?

What prevents consumers from racking up unrepayable amounts on credit cards, filing for bankruptcy, and doing it again? It is illegal for employers to discriminate against those filing for bankruptcy, and many things, such as your house, could be exempt from being seized as you progress. However, possible disadvantages do exist, which may give cause you to look for bankruptcy alternatives. These potential drawbacks include:

  • Not all debts are eligible for discharge through bankruptcy.
  • Your circumstances will determine if your home or car must be sold to pay off your debts.
  • Depending on the type of bankruptcy, it can remain on your credit reports for up to ten years, preventing you from obtaining loans and causing increased interest rates.

A Texas Bankruptcy Attorney Can Help

You may know a relative or a friend who told you that filing for bankruptcy wiped away all of their stress and was the best decision they ever made. That is excellent news. However, it is not the right solution for every case. Your financial situation is as unique as your thumbprint, and it requires the assistance of a trained professional to analyze each detail and weigh the options. If you would like help determining if bankruptcy is the best solution for you and your family, contact an experienced San Antonio bankruptcy lawyer at the Law Offices of Chance M. McGhee. Call 210-342-6400 for a free consultation.

 

Source:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics

Debunking Four Common Bankruptcy Myths

December 3rd, 2020 at 11:56 am

mythsThere are many negative perceptions about bankruptcy. On one hand, some of these perceptions are well-deserved. After all, there are some potential drawbacks to filing. Yet there are also some major misconceptions about bankruptcy—some of which could keep someone from filing when they really should. The following information is designed to debunk these bankruptcy myths. It may even help you decide what your next step should be, and if bankruptcy might be the right solution for you.

Myth 1: Bankruptcy Ruins Your Credit Forever

True, your credit can take a hit after filing for bankruptcy, and it may be difficult to obtain new lines of credit once the process starts, but bankruptcy does not completely ruin your credit. If anything, it gives you a clean slate to start over. It is also usually less damaging than continuing to make late payments on your debts. If you are still a little apprehensive about filing, talk to a qualified bankruptcy attorney for a comprehensive analysis of your financial situation.

Myth 2: You Lose All Your Personal Property

Many people think you have to give up everything in bankruptcy, but this is not always the case. In fact, bankruptcy is designed to help protect some of your possessions from creditors. Furthermore, you may be able to keep some of your unprotected items by agreeing to continue paying on them. Do not expect to keep it all, just do not expect to lose it all either.

Myth 3: Everyone Will Know You Filed

This common bankruptcy misconception really has two components. The first is that, because bankruptcy is a public record, everyone will know that you filed. The second hinges on the first and involves a fear of being labeled a “bad person.” Neither is true. While it is true that your bankruptcy is a public record, those that are most likely to access the information are those that might extend credit to you in the future. Secondly, bankruptcy is not as rare as it used to be. In fact, around one million people and businesses file each year. Filing does not make you a bad person. It just means you got in over your head and need help finding a way out.

Myth 4: The New Laws Make Filing Impossible

The reformation to bankruptcy laws in the early 2000s has caused many to believe that they could not file – that bankruptcy could only be granted to a select few. Rest assured: these new laws were not put in place to restrict those that need bankruptcy relief. Instead, they were implemented to deter those who might try to commit bankruptcy fraud from filing. If you are truly concerned about your eligibility, contact a skilled experienced bankruptcy lawyer for guidance.

Contact Our Experienced San Antonio Bankruptcy Lawyer Today

At the Law Offices of Chance McGhee, we advocate for those who are drowning in debt and struggling to find a way out. We offer comprehensive services and craft creative solutions to help our clients get their financial lives back on track. Committed to your best interests, we pursue the option that is most beneficial for you. Get started today by scheduling your free consultation with our knowledgeable Texas bankruptcy attorney. Call 210-342-3400 for an appointment.

 

Sources:

http://www.uscourts.gov/services-forms/bankruptcy

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

Settling Debt with Your Creditors After a Hardship

November 30th, 2020 at 12:01 pm

bankruptcyLife can be unpredictable. Life can be messy and complicated. And, sometimes, the worst things that can happen to us are completely out of our control. But what do you do when the messy, unpredictable, and complicated lead to financial problems? How do you turn things around and regain control of your financial future? The answer really depends on where you are in the debt collection process. While some may be able to find a viable bankruptcy alternative, others may need more aggressive action. The following information may be able to help you in determining your best course of action for settling debt with creditors.

Creditor Harassment with No Negative Actions

If you have only just started being hounded by your creditors and have not yet received any notice of wage garnishment, tax or property liens, bank seizures, home foreclosure, or any other negative actions against you, you may be able to negotiate a repayment plan with your creditors. But, because not all creditors are willing to work with consumers, and because they have no incentive to actually help you, it may take the assistance of a skilled attorney to resolve the matter before things escalate.

Liens, Levies, Wage Garnishment, Foreclosure, and Other Negative Actions

If matters have already started to spiral out of control and you are facing negative actions, such as a tax lien or levy, wage garnishment, home foreclosure, vehicle repossession, or bank account seizure, resolving the issue can be a little more complicated. In some situations, a lawyer may be able to assist you with a negotiation that can keep you from further actions. If, however, the process has already begun, your only option may be to file bankruptcy.

Stopping Negative Actions and Creditor Harassment Through Bankruptcy

Deciding to file for bankruptcy is not an easy decision. Moreover, it is not an option that works for everyone. However, if you have recently faced a hardship and are experiencing excessive stress and anxiety over the constant harassment from creditors or are about to lose your home, vehicle, or wages, it may be the solution that can help you turn things around. There are several types of bankruptcy, and your attorney can help you determine which one is the best fit for your unique circumstances.

Contact a Texas Bankruptcy Lawyer

At the Law Offices of Chance M. McGhee, we have been helping clients resolve their debt problems for over 20 years. A skilled and experienced San Antonio bankruptcy law firm, we can examine your current financial situation to help you determine the debt solution that may be most appropriate for you. If bankruptcy is the appropriate step, we can represent you in your case and take immediate action to stop creditor harassment and other negative actions against you. Take control of your financial future today. Call us at 210-342-3400 to schedule your free initial consultation.

 

Sources:

https://www.thebalance.com/six-ways-to-avoid-bankruptcy-960626

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics

Bankruptcy Timing for Vehicle Cramdown

November 9th, 2020 at 8:00 am

Cramdown usually lowers your monthly vehicle loan payment and the total amount you must pay. To qualify the loan must be more than 910 days old.


We’re in the midst of a series on filing your bankruptcy case with the best timing. Today we get into the right timing to be able to cram down your vehicle loan. Cramdown is a potentially huge benefit, so it’s important to know how to take advantage of it.  One key consideration in this is the timing of your bankruptcy filing.

Advantages of Vehicle Loan Cramdown

In a Chapter 7 “straight bankruptcy” case, if you have a vehicle loan you must “take it or leave it.” To keep the vehicle, you have to “reaffirm” the vehicle loan. That means you agree to remain fully liable on the debt. It usually means you are stuck with the regular monthly payment, even if you can’t afford it. You can’t change the interest rate, even if it’s high and jacking up how much you must pay. You are stuck with the full balance on the loan, even if the vehicle is worth much less. This includes late fees and any other contractual charges. If you’re behind almost always you have to quickly catch up. Usually the only other choice is to “leave” it—surrender the vehicle and discharge (write-off) the vehicle’s debt. If you need and want to keep your vehicle, that’s not an option.

In contrast, a Chapter 13 vehicle cramdown can be much better in all these respects. Cramdown can reduce your monthly vehicle loan payment. It can reduce the total amount you pay on that debt. You can often reduce the interest rate. You may well not need to pay any accrued late fees and other contractual costs. And you generally don’t need to catch up on late payments. You get all these benefits, IF you qualify for cramdown.

Qualifying for Cramdown

We’ll get to the crucial timing qualification in a moment. But let’s first quickly cover a couple other ones.

First, as implied above, a vehicle loan cramdown is only available under Chapter 13 “adjustment of debts.” Not in a Chapter 7 case.

Second, cramdown is only available for personal vehicles, not business ones. The vehicle must be one “acquired for the personal use of the debtor.” U.S. Bankruptcy Code, Section 1325(a)(hanging paragraph after (9)).

Third, cramdown works best when your vehicle is worth less than you owe on it. The term comes from the power to “cram” the balance on the loan “down” to value of the vehicle. This ability comes from the fact that the law treats secured debts differently than unsecured ones. It favors secured debts because a creditor has property of some sort backing up the debt. This gives the creditor property rights that do not come with an unsecured debt.  Then, very importantly, Chapter 13 allows you to separate the secured part of vehicle loan debt from the unsecured part. The amount of the secured part equals the value of the vehicle. The unsecured part is the remaining part, that which is beyond the vehicle value. Cramdown essentially allows you to rewrite your loan to pay the secured part only. The unsecured part gets thrown in with the rest of your unsecured debts. You pay those only if and to the extent there’s money left over for them.

To make this clearer, let’s say your vehicle is worth $10,000 but you owe $15,000. In this example the secured part of the debt is the amount covered by the vehicle’s value: $10,000. The remaining $5,000 is the unsecured part of the debt. Essentially cramdown allows you and your bankruptcy lawyer re-write the loan at a balance of $10,000. It will likely be at a lower interest rate. You may well be able to stretch the payments out over a longer term. The effect will often be a significant lower monthly payment and total amount you pay. Then at the end of your successful Chapter 13 case you own your vehicle free and clear.

The Timing Qualification

So you’re filing a Chapter 13 case, with a personal vehicle loan with a balance higher than the vehicle value. Now you must meet one more timing consideration.  Your vehicle loan must be more than 910 days old when you file your Chapter 13 case. (910 days is essentially two and a half years.)

What happens if you file your Chapter 13 case at any time before your loan is 910 days old?  You can’t do a cramdown on that vehicle loan. You’re stuck with the regular payments, interest rate, and full balance to pay. You may not be able to afford to keep your vehicle. In any event you’ll miss out on saving lots of money on the debt. So you definitely want to qualify for cramdown if and when you can.

What if your vehicle loan is not yet two and a half years old? What if you h

ave other pressures to file your case before enough time has passed? This is where the knowledge and experience of your bankruptcy lawyer comes in. He or she will determine whether cramdown would help you and, if so, calculate how much it would help. You will receive counsel about ways to possibly ease the other time pressures. Your lawyer will help you figure out whether it’s worth waiting to file in order to qualify. And if so will help you buy time to get there. In other words, you’ll get specific advice on the best course of action for you.

Bankruptcy Timing for Vehicle Cramdown

Chapter 13 Timing to Discharge Student Loans

November 2nd, 2020 at 8:00 am

  

Discharging a student loan requires meeting the difficult condition called undue hardship. Chapter 13 can help through more flexible timing.

 

We’re in a series on the best timing for filing your bankruptcy case. Two weeks ago we introduced the special condition you have to meet to discharge (write off) student loans: undue hardship. Last week we focused on how to better meet that condition with smart timing of a Chapter 7 “straight bankruptcy” case. Today we get into doing that with a Chapter 13 “adjustment of debts case.

Undue Hardship Requirements

We’re focusing on the phrase “undue hardship” because the law clearly establishes that as a condition for discharging student loans. The U.S. Bankruptcy Code says you can’t discharge a student loan unless paying it “would impose an undue hardship on the debtor [you] and the debtor’s dependents.” Section 523(a)(8). Generally bankruptcy courts have interpreted “undue hardship” to include three requirements. Each has a timing consideration. We’ll look at these three, showing how the timing benefits of Chapter 13 case can help you meet them.

Crucial Benefit of Chapter 13: the Long Automatic Stay

But first we need to introduce a crucial benefit of Chapter 13. It’s actually a benefit of all bankruptcy cases, but is especially strong in Chapter 13. And it provides you major advantages with student loans.

We’re talking about the “automatic stay.” This is the federal law that immediately stops almost all collection actions against you. It goes into effect the moment you and your bankruptcy lawyer file your case.

What’s crucial for our purposes here is that this protection usually lasts the length of your case. That’s not very long in a Chapter 7 case: only 3 or 4 months most of the time. In contrast, a Chapter 13 case generally lasts 3 to 5 years. So its automatic stay protection lasts that long. Meaning that your student loan creditors would be stopped from collecting throughout those 3 to 5 years of your Chapter 13 case. This is a huge benefit on its face; it can be even more so for meeting the undue hardship requirements.

1. Presently Inability to Pay

This long period of protection from collection allows you to delay establishing the required present inability to pay the student loan. You have to be experiencing “undue hardship” at the time your bankruptcy lawyer asks the bankruptcy court for the discharge of your student loan. With Chapter 13 you can file the case, imposing immediate automatic stay protection against your creditors, before qualifying for undue hardship.  In particular you can file when anticipating that you would be able to qualify within the following 3-to-5-years.  In the meantime your student loan creditor(s) is (are) prevented from requiring payment and taking other collection actions.

For example, assume you have a worsening chronic medical condition. But that condition doesn’t currently prevent you from maintaining a minimal standard of living if you paid the student loan. Filing Chapter 13 now would protect you from the student loan(s) and the rest of your creditors. Then you could wait as long as 5 years for your condition to worsen until you did meet this requirement.   

2. Extended Inability to Pay

The second requirement of undue hardship looks into the future. Your inability to maintain even a minimal standard of living must be predicted to last throughout most of the student loan repayment period. The advantage in Chapter 13 here is similar to the first requirement just discussed. Being able to wait to file the request for an “undue hardship” discharge as much as years after filing the Chapter 13 case increases your ability to meet this second requirement.

For example, assume you were in a serious vehicle accident a few months before filing the Chapter 13 case. You are receiving short-term disability payments. You need bankruptcy protection from all your other creditors now. But you do not yet know your long-term medical prospects, and thus your financial prospects. Specifically you don’t know whether you will be able to maintain a minimal standard of living throughout the student loan repayment period. Filing Chapter 13 now would protect you from all your creditors, including the student loan one(s). And it would keep you protected as your medical condition stabilized and your financial prospects got clearer. If you qualified for long term undue hardship then, your bankruptcy lawyer could file the request then. You’d more likely qualify because the future would be clearer then.

3. Prior Effort to Pay or Make Other Arrangements

The third requirement is that you must have taken certain action in the past before requesting a student loan discharge. You must have made a meaningful effort to repay the loan. Or else you must have applied for appropriate administrative programs for deferring or reducing payments on it.

In the midst of a Chapter 13 case you may or may not make any direct payments to the student loan creditor. This depends on the rules of your local bankruptcy court. Same with your ability to apply for the administrative fixes. Talk with your local bankruptcy lawyer about this.

If there isn’t great urgency to file the case, your lawyer may well counsel you to apply immediately for the administrative payment-delaying or reducing programs. That way you can better position yourself to meet this part of the test before filing the Chapter 13 case.

Even Without an “Undue Hardship” Discharge, Get Collection Protection

In these Chapter 13 scenarios, at the time of filing you’ll likely not know whether you’ll eventually qualify for hardship discharge. Time will pass while you’re in your case, and your medical/financial circumstances may deteriorate. Or they may improve, so that you don’t qualify for undue hardship. But the automatic stay would protect you from your student loan creditor(s) in the meantime. At some point during the case you may qualify for undue hardship.  But if eventually you don’t, you still would have gotten relief from your student loan creditor(s) during that time. 

 

Bankruptcy and Debt Solutions: How Can I Find a Reputable Credit Counselor?

October 28th, 2020 at 9:03 pm

TX bankrupcy attorney, Texas debt lawyer, Whether you are planning on filing for bankruptcy or simply need assistance in developing a budget, credit counselors can provide you with the tools and resources you need. Unfortunately, not all credit counselors are created equal. In fact, some can leave you worse off than when you started, which makes finding an experienced, reputable credit counselor absolutely essential for your financial future. The following tips can help you find the one most suited for your needs and preferences and improve your chances of finding the financial empowerment you are looking for.

Know Why You Need a Credit Counselor

Each credit counseling agency and provider has an area in which they are best equipped to help their clients. With this in mind, it is critical that you first know why you need credit counseling. To find the answer, consider your goals and examine your current financial situation. If you are filing for bankruptcy, then you will also want to ensure you find a credit counselor that is approved by the United States Department of Justice since those who are not accredited will not be accepted by the courts.

Check and Verify Credentials and Qualifications

While credit counselors that are listed on the Department of Justice’s website most likely carry some of the highest levels of certification and meet some of the most stringent government standards, it is necessary that you check and verify the credentials and qualifications of all other credit counselors. The National Foundation for Credit Counseling and the Financial Counseling Association of America are both renowned agencies that ensure the quality of certified professionals, but the Council of Accreditation is also a reliable accreditation held by qualified credit counselors. You may also wish to check the agency’s rating with the Better Business Bureau to determine if they have any major complaints from other consumers.

Exercise Patience and Due Diligence

When you are dealing with debt issues, it can be easy to get in a rush. You want to finally be free, to feel like you are making some sort of progress, but this is not the time for impatience or hurried decisions. Many consumers spend weeks, months, or even years working with a credit counselor to fully resolve their debt. If you are not working with someone who has your best interests in mind, that can mean a significant amount of wasted time and money, and it could even hurt you in the long run. Take your time, be patient, and practice due diligence so that you can find a credit counselor that best suits your needs.

A Bexar County, TX Debt Management and Bankruptcy Lawyer Can Help

Whether you are looking to file for bankruptcy or need help finding an alternative path, the Law Offices of Chance M. McGhee can help. As a skilled consumer bankruptcy attorney, Attorney Chance McGhee has more than 25 years of experience in assisting consumers and small businesses with their debt and bankruptcy issues. Put your debt problems behind you. Call 210-342-3400 to schedule your free initial consultation with our knowledgeable San Antonio bankruptcy attorney today.

 

Sources:

https://www.nfcc.org/what-we-offer/bankruptcy-counseling/

https://fcaa.org/bankruptcy-counseling/

https://www.justice.gov/ust/list-credit-counseling-agencies-approved-pursuant-11-usc-111

Chapter 7 Timing to Discharge Student Loans

October 26th, 2020 at 7:00 am

Discharging a student loan requires showing undue hardship. The timing of your Chapter 7 filing can determine whether you succeed in this.   

 

We’re in a series on the smart timing of your bankruptcy case. Last week we introduced the special condition you must meet to discharge (write off) student loans: “undue hardship.”

Bankruptcy discharges other special forms of debt—such as income taxes—after the passage of a certain amount of time. But student loans are different in that there is no explicit time period laid out in bankruptcy law. Rather “undue hardship,” the condition you must meet to discharge a student loan, often has timing considerations within it. That is, qualifying for “undue hardship” may require timing your bankruptcy case right.  You may not be in “undue hardship” at one point but could be earlier or later.

Today we show that can play out under Chapter 7 “straight bankruptcy.”(Next week we’ll do the same under Chapter 13 “adjustment of debts.”)

Undue Hardship Requirements

The U.S. Bankruptcy Code says you can discharge a student loan if it “would impose an undue hardship on the debtor [you] and the debtor’s dependents.” Section 523(a)(8). Generally bankruptcy courts have interpreted “undue hardship” to require meeting the following three conditions. Each has a timing consideration. We’ll look at each of these three, showing how they can affect the timing of your Chapter 7 case.

1. Presently Inability to Pay

You first need to show that if you had to repay the student loan under your current income and expenses, you would be unable to maintain even a minimal standard of living.

This focuses on the present. It asks whether, as of the time you are asking for the “undue hardship” discharge, you meet this condition.

The timing issue here should be obvious. You might be able to meet a minimal standard of living while paying your student loans at one point. But then you can’t after your life circumstances change. Or maybe it’s the other way around. You can’t meet that condition now but you may be able to do so in a few months after your circumstances improve.

For example, a person may have a chronically worsening medical condition. For the moment he or she may be able to work and pay the student loan. (This may be after discharging all of his or her other debts through a Chapter 7 case.) But the person may be able to realistically anticipate being unable to work in the future.

Here it likely makes sense to wait to file a Chapter 7 case until her or she can no longer work. That’s especially true if that transition is happening reasonably soon.

2. Extended Inability to Pay

Then you need to show that you expect that your present inability to pay is going to last for an extended period.

This second condition focuses on the future. It asks whether any present “undue hardship” is expected to last through a significant part of the loan repayment period.

This is a more challenging condition because it involves predicting the future and convincing a bankruptcy judge about it.

Here’s an example. Imagine if someone was in an extremely serious vehicle accident a couple of months ago. He or she is presently medically incapacitated and unable to work. Assume that for now the person absolutely can’t afford to pay anything towards his or her student loan(s). But it’ll take a while until the doctors can reliably predict the person’s long-term health prospects. Also, if another driver allegedly caused the accident there may be litigation to determine fault and the amount of damages. So currently this person’s future financial prospects are very unsettled. It’s an open question how long he or she will continue to be unable to pay the student loan(s). In particular it’s unknown whether this inability will persist for much of the remaining term of the student loan(s).

Here it could make sense to wait to file a Chapter 7 case until knowing better whether the physical disability and financial incapacity are expected to continue for that length of time.

3. Prior Effort to Pay or Make Arrangements

And third, you need to show that you previously made a meaningful effort to repay the loan. Some other available arrangements may also qualify.

This last condition focuses on the past. It asks whether you’ve reasonably addressed your student loan debt(s), by making payments when you could and/or trying to get some kind of administrative relief before asking for the “undue hardship” discharge.

Here we’re looking backwards instead of forward. You can’t change the past. But you may be able to take appropriate steps now so that in the future the past will be different. Then you could more likely meet this condition when filing a Chapter 7 case in the future.

 For example, consider a person who has recently started being obligated to pay a student loan and can’t do so. He or she likely needs to first try to defer and/or reduce payments before qualifying for “undue hardship.” Or, consider another person who’s been in repayment mode but has not looked into the administrative possibilities lately. It will likely be necessary to do so to show this effort and then file a Chapter 7 case afterwards.

Timing Choices Can Be Tough

Almost always the timing of a bankruptcy case involves the weighing of different pressures. Does it make sense to delay filing to improve your likelihood of qualifying for “undue hardship”? Or are there other immediate and looming creditor problems that press for an earlier bankruptcy filing?

This is one of the most important benefits of having a bankruptcy lawyer. He or she will enable you to understand the timing options, and the advantages and disadvantages of each. The options will likely be impossible to weigh realistically otherwise.

 

Bankruptcy Timing to Discharge Student Loans

October 19th, 2020 at 7:00 am

  

Discharging—permanently writing off—student loans can be difficult. You may be able to make it easier to do with good bankruptcy timing.   

Discharging Student Loans in Bankruptcy

It takes certain circumstances to discharge student loans. Those circumstances can involve the right timing of your bankruptcy case.

Bankruptcy discharges most debts. But it “does not discharge” you from a student loan unless not discharging that debt “would impose an undue hardship.” “[I]mpose an undue hardship” on whom? “[O]n the debtor [you] and the debtor’s dependents.” Section 523(a)(8) of the U.S. Bankruptcy Code.

What does that mean and how is it affected by the timing of your bankruptcy case?

“Impose an Undue Hardship”?

What does it take for you and your dependents to suffer an “undue hardship”? The Bankruptcy Code defines many terms (See Section 101, Definitions), but not this one.

Often when Congress deliberates and passes a statute there is discussion about the meaning of a term within the statute. That’s its “legislative history.” But there is no such helpful written explanation here. “The legislative history…  also fails to precisely specify how courts should determine whether a debtor qualifies for a discharge based on an undue hardship.” Ashley M. Bykerk, Student Loan Discharge: Reevaluating Undue Hardship… , 35 Emory Bankr. Developments J., 509, 512-513 (2019).

So the bankruptcy courts have been left to figure out, case by case, what qualifies as “undue hardship.”

The courts start with those two words. Congress added “undue” apparently to create a standard that is beyond or more than a simple hardship. “Undue” means “exceeding what is appropriate or normal; excessive.” So Congress seemed to say that to discharge a student loan it’s not enough if it’s causing you a hardship. It must be causing you a more-than-normal, excessive hardship.

But how is such a level of hardship determined in practice?

The 3-Part Test

As bankruptcy courts throughout the country have interpretted “undue hardship,” over time they’ve settled on a 3-part test. There are some differences among the courts but generally you need to meet the following three conditions:

1. If you had to repay the student loan under your current income and expenses, you would be unable to maintain even a minimal standard of living.

2. This inability is expected to last for a significant part of the loan repayment period.

3. You previously made a meaningful effort to repay the loan, or to qualify for appropriate forbearances, consolidations, and payment-reduction programs.

The Timing Considerations of the 3-Part Test

When you look at these three conditions you can see that each has a timing component:

1. The first condition focuses on the present. It asks whether, under your income and expenses as of the time you are asking for the “undue hardship” discharge, you’d be unable to maintain even a minimal standard of living if you had to repay the student loan.

2. The second condition focuses on the future. It asks whether any present “undue hardship” is expected to last through a significant part of the loan repayment period.

3. The third condition focuses on the past. It asks whether you had made a meaningful effort to repay the loan or to qualify for appropriate administrative relief before asking for the “undue hardship” discharge.

Whether or not you qualify under these conditions can shift over time. For example, you may be expecting worsening health which will reduce your income and increase expenses. So you may be currently able to maintain a minimal standard of living but won’t when your health worsens.  So you may not meet the first condition today but expect to later. Thus, whether you qualify for an “undue hardship” discharge can turn on when you file your bankruptcy case.

Next

The next two blog posts will show how you and your bankruptcy lawyer can use these principles to your benefit. We’ll look at pertinent timing issues when filing a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” Feel free to call us, your bankruptcy lawyers, in the meantime.

 

How Should I Handle Creditor Harassment After a Bankruptcy Filing?

October 15th, 2020 at 8:39 pm

TX bankrutpcy attorney, Texas bankruptcy lawyerWhen you file for bankruptcy, you are granted an automatic stay on most of your debts. Essentially, this means your creditors cannot contact you or attempt to collect the debt. What happens, though, if the creditor keeps calling and harassing you through the mail, at your work, or at your home? Rest assured: you can enforce the protections that bankruptcy offers.

When Contact Is a Genuine Oversight

All creditors know (or should know) that a bankruptcy filing means they must cease all contact with you, as the debtor. As such, most who violate this rule have simply done so due to an oversight. Perhaps they did not remove your name from the system properly, or they have not received the paperwork yet that notifies them of your filing. In any case, it is important that you not overreact or panic during the initial contact from a creditor. Instead, simply inform them that you have filed for bankruptcy and politely refer them to your attorney.

If the contact was made by phone, document the date and time of the call, the agent’s name and extension number (if applicable), and the creditor’s name and phone number. If the contact was by mail, copy or scan the mailing (after you have written a response that indicates your bankruptcy filing and your attorney’s number). This information gives you proof of contact and ensures you can take action if the contact continues or escalates.

When Your Notice Is Ignored

If you have already notified a creditor of your bankruptcy filing and have referred them to your attorney, and they still call or otherwise attempt to contact you, it is time to take the next step. Again, you should document the contact, but this time, forward the information to your attorney. Let your lawyer know that you have already notified the creditor of your filing and that you have provided them with the attorney’s number. From there, your attorney will likely contact the creditor and let them know they are in violation of the stay order.

If the creditor continues to contact you, even after you have spoken with your attorney, do not lose your temper. Instead, let your lawyer know the dates and times of the phone calls or letters. If necessary, he or she can summon the creditor to court. At the very least, the creditor may be reprimanded and instructed by the judge not to contact you. Some may also be subject to fines and/or punitive damages. Your attorney can walk you through the process and your options.

Contact a Texas Bankruptcy Lawyer

Filing for bankruptcy is not an easy decision. Creditor harassment after you file does not make it any easier. Thankfully, you can have the Law Offices of Chance M. McGhee on your side. Dedicated to protecting your best interest, our experienced San Antonio bankruptcy attorney can take quick and effective action to stop creditor harassment. Because we care about your future, we even provide guidance on how to make the most of your new start. Get the quality representation you deserve. Call 210-342-3400 and schedule your free consultation with us today.

 

Sources:

https://www.forbes.com/sites/christopherelliott/2018/07/18/how-to-protect-yourself-from-debt-collectors-and-debt-collection-scams/

https://www.thebalance.com/when-creditors-do-not-stop-calling-after-bankruptcy-4156787

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210-342-3400

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