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Archive for the ‘bankruptcy schedules’ tag

Forgotten Debts

April 22nd, 2019 at 7:00 am

What do you need to do, what efforts is worth taking, if there are debts you don’t have any records on or you’ve forgotten about?  

 

Several blog posts ago we introduced the law that debts “neither listed nor scheduled” risk not being forgiven in bankruptcy. Section 523(a)(3) of the Bankruptcy Code. This follows the bankruptcy principle that debts are forgiven—“discharged”—unless a debt fits within a specific exception. Debts “neither listed nor scheduled” is one of the exceptions.

Related to this exception to discharge we’ve recently looked at:

  • how to add a debt after filing your case that you didn’t originally list, and your timing for doing so
  • an exception to this discharge exception, that is, your unlisted creditor’s debt still being discharged if it still finds out about your case, and does so on time
  • debts sold or assigned to collection agencies

This leaves one last question for today about unlisted debts:

What do you do if you don’t know all of your debts because you’ve moved or lost track of them for any other reason?

This practical question gives us the opportunity to apply the principles we’ve been digging into these last few blog posts.

The Potential Consequences of Not Listing Debts

Start with the assumption that you will continue to owe any debt you don’t include in your bankruptcy debt schedules. Obviously, filing any kind of bankruptcy is a big deal. The discharge of debts is a legal right, but one that you can exercise very seldom. Hopefully it’s something you’ll only need once in your life. You want to do it right.

Chapter 7 “straight bankruptcy” generally takes about 4 months from start to finish. It costs pretty much the same in fees and damage to your credit whether you include all your creditors or miss one or two. You vastly increase its effective cost if afterwards you continue owing a debt or two that you could have discharged. Plus, instead of getting the peace of mind of a full fresh start, you’d be saddled with potentially avoidable debt.

Chapter 13 “adjustment of debts” involves a payment plan lumping together all your debts. Most unsecured creditors have to share out of a pool of money based on what you can afford to pay. That is often a small percent of what you owe, perhaps even 0%.  If you neglect to list a debt in your schedules, it can’t participate in your plan. So, instead of paying that debt the same percentage that you’re paying others, you’d have to pay it in full. Since all your money is earmarked for your other creditors, you’d have nothing to pay the unlisted creditor. So when it forced you to pay—such as by garnishing your paychecks—that would disable your Chapter 13 plan. Frankly, that would be a mess.

So, of Course, Do All You Can to Know and List All Your Debts

We don’t want to scare but rather to motivate you. It’s worth the effort to figure out who you owe and to find their accurate addresses.

One obvious place to start is with a credit report. Talk with your bankruptcy lawyer about getting free ones from all three of the major consumer credit agencies.

But it’s very important to know that a credit report is NOT necessarily a complete list of your debts. For some people it might be. But for others their credit reports would be woefully incomplete. Financial institutions and major consumer creditors will quite reliably be on your credit reports. But medical providers and various other kinds of creditors—not so much.

It IS worth sifting through ALL of your paper and computer files (and piles!) to find any other debts. Scour through your memory about possible obligations you haven’t thought about lately. Think about old unpaid landlords and utilities, possible bounced checks, or unpaid personal loans from friends or family.

Possible Claims, Ambiguous Amounts

Consider situations where you may or may not owe anything. Are there any old or more recent unresolved vehicle accidents? Might you have caused personal or property damages to some person or business? Are there any unusual possible claims against you, for defamation, embezzlement or other misuse of funds or of trust? Could there be any claims come out of an old or not so old divorce, non-marital relationship, any family fight, or the closing of a business? Are there any almost forgotten threats against you to pay for anything whatsoever?

Bring any of this stuff up with your bankruptcy lawyer, preferably at your first meeting. Some situations may genuinely not warrant including as a possible debt. Your lawyer is the person who knows how to protect you, and to guide you through the tough judgment calls. You need to ask the questions so that he or she can give you the right advice.

Debt Amounts

 It’s generally not that important to know how much you owe—a sensible estimate is often good enough. But again talk with your lawyer, because sometimes—depending on the type of debt—the amount is important.

Collection Agencies

If you know the original creditor but not a subsequent collection agency, start by listing the original creditor. It may well pass on your bankruptcy filing information to the collector (although you can’t count on this). Also, the original creditor may actually still owe the debt. The collector may have only a temporary collection agreement.

You still do want to list any and all collectors on an account. That’s because it’s hard to know who owns the debt. That may take not just looking through all your papers but also doing internet research and making phone calls. Your bankruptcy lawyer and his or her staff will be your guide.  

Very Old Debts

Most debts can get old enough that the creditors can no longer collect on them. Most states have statutes of limitations on the collection of debts.

But those laws are often complicated, with different lengths of time for different kinds of debts. There are different triggers that start the time running, and other events that can suspend (“toll”) the time from running. The time limit can sometimes be extended simply by you being out of state or hiding from collection.

Even if a statute of limitation arguably applies you’d rather not have to defend a collections lawsuit on this basis.

Talk with your bankruptcy lawyer about what to do to best protect your from old and very old debts.

 

Timing: Including Debts in Bankruptcy

September 18th, 2017 at 7:00 am

A bankruptcy covers the debts that exist as of the time your case is filed, not future debts. So how do you know when to file your case? 

 

If you’re feeling overwhelmed by your present debts so much that you’re considering bankruptcy, you’re not likely worrying much about future debts.

Or maybe you are.

Maybe you’re dealing with a medical issue and are very concerned about how you’re going to pay for future medical expenses. You’re already feeling overwhelmed by your present debts. But you’re wondering if you should wait to file bankruptcy until after you’ve finished incurring new medical debts.

Or maybe you’ve been relying on credit cards, cash advances, or other credit to get by day to day. You owe a lot of money and don’t see how you could ever pay it all. So you know you need some relief from these debts. But right now you’re afraid of being cut off from these sources of credit. So you wonder whether and when you should file bankruptcy.

Bankruptcy Only Includes Present Debts

In these and many other situations a good starting point is to recognize that the timing of your bankruptcy case is crucial. Debts that legally exist at the time you and your lawyer file your bankruptcy case are included in that case. Future debts are not. So in a Chapter 7 “straight bankruptcy” case, only the existing debts can be discharged (legally written off). In a Chapter 13 “adjustment of debts” case usually only those existing debts can be included in your payment plan.

The Best Advice? Get Some Good Advice

The two situations mentioned above—the medical and relying-on-credit ones—are not easy to resolve.

Sometimes knowing when to file bankruptcy IS pretty straightforward. Somebody needs relief from a lawsuit or wage garnishment or vehicle repo or home foreclosure, and needs it now.  

But it’s not so simple in these two situations. If you can’t pay your present medical and other debts, but want to wait to file bankruptcy to include those upcoming medical debts, what do you do about the debt collectors in the meantime? If you can’t pay your living expenses without using new credit, how do you get out of that vicious cycle?

The honest truth is that it depends on your unique situation. Because you are unique, the solution will be unique to you.

There is no cookie-cutter answer because you’re not a cookie, a gingerbread man. You’re an individual with individual circumstances needing individual advice.

For that advice to be worthwhile it needs to come from someone who understands you and your situation, who is competent about your legal options, and who can sensibly match your unique situation to the best option.

That “someone” is your bankruptcy lawyer. He or she is legally and ethically required to strictly serve only you and your interests. Your lawyer has likely helped hundreds if not thousands of people, with everything from relatively simple to extremely complicated situations. He or she has not seen a situation exactly like yours but has seen many very similar ones. Your lawyer has spent a career wrestling through tough situations like yours.

Thorough Knowledge and Good Judgment

A competent lawyer gives you not just knowledge about legal options; you should also get the benefit of good judgment. You need somebody who will help you find the best way out what may feel like an impossible situation. In fact you may have a serious Catch-22. Maybe (as in the medical example above) you simultaneously need bankruptcy protection now AND need to wait to file later. It takes someone who knows the law intimately and understands your situation fully to craft that unique best path forward for you.

In our next blog post we’ll demonstrate some good judgment by a bankruptcy lawyer. We’ll show how two similar medical-debt timing situations result in very different legal advice.

 

Petition, Schedules, Electronic Filing

October 3rd, 2016 at 7:00 am

The Petition requesting relief and the Schedules of assets, debts, income, and expenses are the key documents filed in your bankruptcy case.

 

Bankruptcy Petition

A week ago we explained the difference between a voluntary bankruptcy case and involuntary one. Involuntary ones are so rare, especially in non-business settings, that there’s not much need to discuss them any further.

We also got into individual and joint bankruptcies. Voluntary individual and voluntary joint cases are both “commenced by the filing with the bankruptcy of a petition.” (See Sections 301(a) and 302(a) of the U.S. Bankruptcy Code.)

The petition is a document that currently, in its official version, is about 8 pages long. But at its heart are three simple, short words: “I request relief.”

At the heart of getting bankruptcy help is simply asking for that help.

Bankruptcy Schedules

You’ll hear reference to your “schedules.” They are forms listing your basic financial information: your property and your debts, your income and expenses.

Other Documents

There are some other documents that your bankruptcy lawyer puts together with your help.

There are more but the petition and schedules are the core documents (along with the Chapter 13 plan for cases filed under that chapter).

Electronic Filing

The United States bankruptcy courts (and all federal courts) moved to a largely paperless electronic document filing system from the late 1990s through 2001. In limited circumstances documents can be filed by physically taking them to the bankruptcy court clerk’s office. But most documents MUST be filed electronically.

Overall this makes filing documents at the court tremendously more efficient. Electronic filing is especially helpful when you need to stop a creditor’s action by filing a bankruptcy case. You or your lawyer no longer needs to physically transport the petition and other documents to the nearest bankruptcy court. Instead, the lawyer or his assistant can have the case filed in just a few minutes. That’s especially helpful in situations in which the bankruptcy court is far away.

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