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Archive for the ‘chapter 7’ tag

Social Media Posts Can Cause Trouble During and After Bankruptcy Proceedings

January 18th, 2021 at 2:54 pm

TX bankrutpcy lawyer, TX bankruptcy attorney, Many people share intimate details of their lives on social media — vacations they take, places they shop, purchases they make, and even what they wear. Unfortunately, this form of sharing can sometimes have legal repercussions. For example, angry posts about your soon-to-be ex-spouse can find their way into your divorce case. Similarly, social media posts that depict a financial situation that is different from what you have claimed in bankruptcy filings could also cause serious problems. In fact, a high-profile example from a few years ago shows just how difficult things can be when you are not careful on social media.

Bankruptcy Filing and a Social Media Blunder

In 2015, the rapper 50 Cent filed for Chapter 11 bankruptcy protection. Right in the middle of it all, he posted several Instagram photos with loads of cash — one of a stack of money in his freezer, one in which bills were arranged to spell the word “Broke,” and one of him surrounded by stacks of cash on a bed. The rapper claimed the bills were props, such as those used in music videos, but his creditors and the judge were far from amused.

According to the New York Times, 50 Cent stated that the postings were essential to maintaining his appearance and securing his future. When his history of merchandising deals and “living large” were mixed with a number of failed business ventures and several lawsuits, it was understandably difficult to determine whether he was hiding assets or telling the truth. Because of this, his creditors asked for a reevaluation of his assets, and a judge pulled him back into court to speak about the matter.

This story does have a happy ending, however, as the bankruptcy was discharged less than one year later after 50 Cent paid off more than $22 million in debts. He managed to pay off his five-year repayment plan in just under eight months. Lawyers for the rapper indicated that he was able to pay off the debts so quickly thanks largely to a substantial settlement he received in a legal malpractice lawsuit.

Avoid Creating Additional Problems the Same Fate

Creditors do not know you personally. They have no way of knowing that, while posting pictures by the beach in Maui, you were simply on a lunch break during a work event. Tending to an ill family member in San Francisco can look an awful lot like a leisurely trip, and posting pictures of yourself in or outside of a rental car while your old jalopy is being repaired can look like you are hiding assets. In other words, be mindful of what you are posting on social media during bankruptcy proceedings; anything can be misconstrued to look like fraud.

A Texas Bankruptcy Lawyer Can Help with Your Debt Problems

If you are drowning in debt, bankruptcy may seem like the best option, but it is not the right path for everyone. Discuss your situation and all your possible solutions with the team at the Law Offices of Chance M. McGhee. Call 210-342-3400 for a free consultation with an experienced San Antonio bankruptcy attorney today.

 

Source:

http://www.nytimes.com/2016/03/11/nyregion/50-cent-bankruptcy-fake-cash-money-bills.html

https://www.theguardian.com/music/2017/feb/03/50-cent-discharged-bankruptcy

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.

 

Common Myths About Bankruptcy in Texas

September 29th, 2020 at 9:52 am

Texas bankruptcy lawyer, TX chapter 7 attorneyAt our firm, we help clients every day with questions and concerns about the bankruptcy process under the U.S. Bankruptcy Code. Our experience has shown us that bankruptcy proceedings are often misunderstood, and unfortunately, misinformation abounds among those considering filing for bankruptcy. If you are thinking about bankruptcy as an option for your situation, it is very important for you to fully understand the potential advantages and disadvantages, as well as what might happen after the proceedings are complete. With this in mind, here are three of the most common myths about bankruptcy, along with the truth about each one.

Myth # 1: My Employer Will Be Notified That I Filed for Bankruptcy

Financial struggles are embarrassing for many people, and the reasons are understandable. As a result, it might be humiliating for you if your employer were to be notified of your bankruptcy filing. The good news is that this myth—albeit common—is just that: a myth. The bankruptcy process does not involve any employer notification whatsoever unless you happen to owe a formal debt to your employer somehow—in which case your employer would be notified, but as a creditor. Bankruptcy filings are public record, which means they could technically be published by the press, but it is unlikely that your employer would have much interest in searching through such publications.

Myth # 2: I Will Never Get Credit for a for a Major Purchase Again

Filing for bankruptcy can certainly have a negative effect on your credit rating, but the effects are temporary. Your bankruptcy will not bar you from ever having the ability to secure credit for major purchases like a home or automobile. For most bankruptcy filers, the credit approval needed to secure a home loan would be possible in about two to three years from the date of their bankruptcy filing. Obtaining approval for car loans and credit cards generally take less than two years. What is most important in re-qualifying for credit is making sure that you are rebuilding your credit properly in the period following your bankruptcy filing.

Myth # 3: I Do Not Have Enough Debt to Qualify for Bankruptcy

The bankruptcy process does not require any minimum amount of debt for a party to be able to file a petition for bankruptcy. While it is not prudent to initiate the process of bankruptcy without a reasonable amount of debt, what constitutes a “reasonable amount of debt” can vary widely from one situation to another. If you can demonstrate that your ability to manage your debt is severely diminished, it is likely that your bankruptcy petition will be accepted by the court. Keep in mind that if you are filing for Chapter 7 bankruptcy protection, you will need to undergo a means test to determine your ability to pay your debts.

Speak with a New Braunfels Bankruptcy Lawyer

The finances of many hardworking individuals have been severely impacted by the COVID-19 lockdown of the last few months. If you are in an unmanageable financial situation due to debt, filing for bankruptcy may be an option. Contact a knowledgeable San Antonio bankruptcy attorney to learn more about the different types of bankruptcy protection that might be available to you. Call 210-342-3400 for a free consultation with the Law Offices of Chance M. McGhee today.

 

Sources:

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

https://www.nerdwallet.com/article/finance/rebuild-credit-after-bankruptcy

Bankruptcy and the Eviction Moratorium

September 14th, 2020 at 7:00 am

  

The CDC’s recent order stopping all U.S. residential evictions gives you a new tool to use with some wise bankruptcy planning. 

 

Last week’s blog post was about a new federal order temporarily stopping certain residential evictions throughout the country. Please see that blog post about which renters and rental properties are covered, and how renters qualify for the moratorium.

If you are a tenant and are considering filing bankruptcy, this eviction moratorium can affect the timing and tactics of your filing. We start addressing that today.   

The Moratorium Ends on December 31, 2020

The most important aspects of the eviction moratorium are that it is temporary and does NOT forgive any rental payments. The “order prevents you from being evicted or removed from where you are living through December 31, 2020.”  However, “[y]ou are still required to pay rent… .”  

The obligation to pay the rent is just delayed. “[A]t the end of this temporary halt on evictions on December 31, 2020, [your] housing provider may require payment in full for all payments not made prior to and during the temporary halt… .” Your “failure to pay” then would make you subject to eviction at that point. 85 Federal Register 55292, 55297.

Note that you would almost certainly then owe more than just the missed rental payments. You also continue to be liable for “fees, penalties, or interest for not paying rent” imposed under your lease agreement. See Declaration, p. 2.

The Bankruptcy Timing Consequences—Chapter 7 “Straight Bankruptcy”

Bankruptcy generally allows you to discharge—permanently write off—debts that you owe at the time you file the bankruptcy. It does not discharge future debts.

So one seemingly straightforward option is to delay filing a Chapter 7 bankruptcy, then file to discharge the accrued rent. Any other contractual fees and penalties could also be discharged. Assuming you qualify for the moratorium, this lets you live rent-free for several months.

The crucial practical question is whether you’d be able to continue living at this rental or would have to move.

The situation is relatively simple if you do move away at that point. You would be liable for any rent or other fees accrued after you and your bankruptcy lawyer file your case. That’s because again the bankruptcy discharge does not cover any obligations accrued after the filing. So you’d have to move before or at the time you file the Chapter 7 case. Or else you’d have to pay rent and any other fees accrued after the date of your bankruptcy filing.  

Staying at Your Rental after Filing a Chapter 7 Case

But could you discharge any pre-filing obligations to your landlord and continue living there by paying all after-filing obligations? There’s a legal answer and a practical one.

The legal answer is very likely “no.”  You have to pay the pre-filing obligations if you want to stay. After filing a Chapter 7 case you have a short time to decide to “accept or reject” the lease agreement. You have 60 days. If you “reject” it, you leave and then usually don’t owe any pre-filing obligations to your landlord. If you “accept” the lease agreement, you have a very limited time to pay any pre-filing obligations. If you don’t accept the lease agreement on time, your landlord can evict you.  Or if you do timely accept your lease but then don’t pay the pre-filing obligations on time, your landlord can also evict you. (See Section 365 of the Bankruptcy Code on unexpired leases, one of its more complicated provisions.)

Notwithstanding all this, under some circumstances you might be able to persuade your landlord to let you stay. We live in crazy times. Your landlord may have multiple renters unable to pay their back rent, and may prefer that you stay. Your bankruptcy filing, in which you’re presumably discharging lots of other debts, will likely make you better able to afford your rent. The landlord may be open to negotiating something you can live with.

Obligation to Make Partial Rental Payments

Relatedly, be aware that to qualify for the eviction moratorium you have to try to make partial rental payments.  You have to certify the following:

I am using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses… 

85 Federal Register 55292, 55297.

The point of this is that it opens you and your bankruptcy lawyer to some creative planning and negotiations. You could agree with your landlord to make partial rent payments during the period before filing bankruptcy (which you could otherwise discharge). In return you or your bankruptcy lawyer could ask for the landlord’s flexibility about payment terms after your bankruptcy filing.  

Or more likely, you use the threat to reject the lease and discharge all the pre-filing debt as leverage. Instead you agree to accept the lease but pay only part of the debt and/or get payment terms you can tolerate.

A Chapter 13 Teaser

As you can see Chapter 7  is quite helpful, used with the eviction moratorium, if you’re leaving the rental property. You live there without paying the rent for months and then discharge that obligation in bankruptcy.

But if you want to stay, Chapter 7 leaves you to a large extent at the mercy of your landlord. You only get a bit of leverage, which may or may not work with your particular landlord.

What if you could legally force your landlord to give you much more time to catch up? What if you had many months to pay the rent not paid during the moratorium? In our next blog we’ll show you how a Chapter 13 “adjustment of debts” case may let you do this.

 

Which Type of Bankruptcy Is Best for My Financial Situation?

August 26th, 2020 at 2:29 pm

Texas chapter 7 lawyer, Texas chapter 13 attorney Bankruptcy is often seen as a last-ditch effort to overcome the financial burden that you may be experiencing. While this is typically the case, the level of debt that one may be in can vary greatly depending on their circumstances. Some may have no income and are struggling to pay basic bills, while others may have a steady income but have found themselves buried by exponential medical or credit card expenses. There are two common ways that Texans can file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. By looking at your unique circumstances, you can determine what type of bankruptcy filing is appropriate.

Chapter 7

When imagining what filing for bankruptcy looks like, people often imagine something along the lines of Chapter 7 bankruptcy. Also known as “liquidation bankruptcy”, this form of bankruptcy has the trustee sell the debtor’s property and use the money collected to pay off their debts, as close to the total amount as possible – all remaining debts will be forgotten. This form of bankruptcy may seem preferable to some, since the process only takes about six months and some debts may be forgotten, but it is not available to all debtors. If the debtor’s income falls below the state’s median household income, which in Texas is $59,570, he or she is eligible to file for Chapter 7 bankruptcy. The debtor will not lose all of his or her assets during the bankruptcy process, since some personal property can be claimed exempt from the process.

Chapter 13

For those who have a steady, dependable income, Chapter 7 bankruptcy is not an option. These debtors will file for Chapter 13 bankruptcy, which involves formulating a payment plan over a three- to five-year period. In other words, none of their debts are forgotten and they are expected to pay it off in time. However, Chapter 13 filers will not be required to give up any of their property or assets to pay off their debts as long as they follow the terms of their payment plan. A portion of their paycheck will go towards these unpaid debts once their basic needs are met.

So, Is Bankruptcy Really Best for Me?

You may still be wondering if filing for bankruptcy is your best course of action. You should consult a bankruptcy attorney for advice on whether your financial difficulties warrant filing for bankruptcy. Even before speaking with an attorney, you can take your own financial inventory to really see where you are at. Take a look at the following financial areas to gauge your need to file for bankruptcy:

  1. Debts. Take account of all of the debts looming over you. This includes any unpaid credit card bills, overdue loans, or other outstanding balances. List these debts in one area to give yourself a general estimate of your financial burdens.
  2. Monthly Costs. Next, list out your monthly expenses below your total debts. This should include any monthly bills, such as rent, utilities, food, and more. You can estimate some of your monthly costs but should include anything that you purchase on a regular basis.
  3. Income. Look at your income from the past six months, excluding social security. If you have a spouse, include their income in your calculations. By looking at your current debts and monthly expenses, you may be able to re-budget your income to begin paying off these debts.
  4. Assets or Property. Do you have an extra car that you rarely use? Or perhaps you have a vacation home that you are willing to part with. Before filing for bankruptcy, consider your other options to obtain the money you need to pay off your debts. If you do not have any additional assets or any that you are willing to part with, you may need to seriously consider filing for bankruptcy.

Contact a New Braunfels Bankruptcy Lawyer

Making the executive decision to file for bankruptcy can be one of the most difficult, and humbling, decisions you have to make. The stigma that surrounds bankruptcy often leaves people putting off the inevitable and continuing to build up debt in the meantime. If you are struggling financially, turn to the Law Offices of Chance M. McGhee for advice. Our compassionate legal team provides free consultations to allow potential clients to discuss their case before making a decision. Rather than allowing things to stack up and become even more burdensome, contact our San Antonio bankruptcy attorney for help at 210-342-3400.

 

Sources:

https://www.consumeraffairs.com/finance/bankruptcy_02.html

https://www.census.gov/quickfacts/TX?

If I Have Overdue Medical Bills, Can I File for Bankruptcy?

July 27th, 2020 at 11:42 am

TX bankrutpcy attorney, TX chapter 7 lawyerThe U.S. has some of the highest medical costs in the world, leaving many patients who visit the emergency room or go to the hospital financially destitute. Even those who have health insurance may find that their coverage is not enough to fully cover their necessary medical treatments. No one can predict the manifestation of serious illnesses or accidental injuries, but you rarely have a valid choice, leaving you to choose between unwanted debt or suffer the possibly fatal consequences. If you find yourself overwhelmed with medical debt, you do have legal options to help you payback the costs overtime or relieve yourself of the costs altogether. Filing for bankruptcy may be your last resort, but it may also be your only chance of moving forward.

“Medical Bankruptcy”

Those whose debt is solely made up of pastdue medical bills may believe that they can file for “medical bankruptcy” and avoid their other assets getting involved in the process. There is no type of bankruptcy known as medical bankruptcy; however, medical bills are a common reason that people file for bankruptcy. Medical debt falls under the same category, known as unsecured debt, as credit card debt, personal loans, old utility bills, and borrowed money from family or friends. Since bankruptcy cases must be equally fair for both the debtor and creditor, you must list all of your debts, personal property, and real estate within your bankruptcy case. There are two ways that most people file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy, both of which have a large impact on your credit score.

Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy is often the more desired option since it discharges or forgives all of your debts, not requiring you to pay them back. Any medical debt that you have accumulated can be included in a Chapter 7 bankruptcy claim. The process typically only takes four to six months to complete and grants immediate relief to those filing for this type of bankruptcy. There are a few types of debt that cannot be discharged, such as income taxes and past-due child support or alimony payments. While Chapter 7 is often the most desirable option, since you will not need to pay the debt back, there are strict eligibility requirements. If your household income is lower than the state median income, you are eligible to file Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

This type of bankruptcy extends your timeline for paying back your debts, creating a three to five year payment plan for debtors. Chapter 13 bankruptcy is the common option for those who have a steady income, allowing them to pay off their debts while still having disposable income. The amount owed is dependent upon your debt amount and your income. Depending on your situation, your amount owed could be reduced and you may have your remaining debt discharged at the end of your payment plan. Any missed payments can lead to the seizing of your assets.

Contact a New Braunfels Bankruptcy Attorney

As you can see, there are a number of factors that can contribute to your ability to file for bankruptcy and which type of bankruptcy is best for your situation. It is always advised to speak with a well-seasoned attorney who understands your state’s policies regarding filing for bankruptcy. The Law Offices of Chance M. McGhee has over 20 years of experience assisting Texans overcome their debt difficulties, including those that consist of significant medical costs. Contact our Boerne bankruptcy lawyer at 210-342-3400 to discuss the details of your case during your free consultation.

 

Sources:

https://www.thebalance.com/what-to-know-about-filing-medical-bankruptcy-4159606

https://www.creditkarma.com/advice/i/medical-debt-in-bankruptcies

https://upsolve.org/learn/get-rid-of-medical-bills-in-bankruptcy/

 

What Are the Risks of Working with a Debt Settlement Company to Resolve My Debt?

July 13th, 2020 at 10:46 pm

TX bankrutpcy lawyer, Texas debt attorney, The words “filing for bankruptcy” can be enough to send those struggling financially into a full-blown anxiety attack. You may be thinking about the dramatic television depictions of bankruptcy, with peoples’ belongings being publicly advertised for sale and everyone becoming aware of their financial destitute. Because of these dramatizations, many will seek alternative options for paying off their massive credit card debts. No one wants to find themselves in the situation where bankruptcy is their only option; however, these alternatives can be more harmful to your credit than properly filing for bankruptcy. Debt settlement companies are a commonly advertised substitute, but the promises are often too good to be true.

What Is a Debt Settlement Company?

A debt settlement program is one sponsored by a for-profit company with the promise that they will work with your demanding creditors to negotiate a viable settlement for you to resolve your past-due payments. This settlement will be a lump-sum amount that is less than your total debt owed. Since it is unrealistic that you would have this money on hand, you will be asked to set aside a fixed amount every month into a savings account. Once the sum totals the settlement that they negotiated, you will pay the settlement amount. These companies or programs often tell their clients to halt their monthly payments to their creditors as they gather their settlement funds in their savings account.

The Risk You Take

As is the case with any financial decision, it is critical that you are fully informed of the potential risks that you may face if you decide this is the route that you would like to take.

  1. Unrealistic Expectations: These companies have terms and conditions required of their clients, including a time period that they must continue to set aside funds. Many of these programs require money to be deposited into their savings account, consistently, for 36 months or more. This can be a difficult requirement to meet since your financial situation can greatly change over three years. It is important to read these fine print details before signing up because you may end up dropping out for failure to meet them, leaving you in the same financial spot as you were when you signed up for the program.
  2. Empty Promises: There is no guarantee that their negotiations will stick. Many creditors may not agree to their negotiations, and after three years of saving, you may still owe the full amount. Debt settlement programs also tend to negotiate smaller debts first, allowing your larger debts to continue racking up interest and fees that you will need to pay later on.
  3. Faulty Advice: As previously mentioned, many of these programs encourage their clients to stop all payments to their creditors as they save on the side. This can have a negative impact on their credit score and have you accruing a high amount in late fees and other penalties.

Call a New Braunfels Bankruptcy Alternatives Lawyer

Unfortunately, some companies offering debt settlement programs fill their clients with empty promises. These programs may charge fees before any of your debts are settled and improperly advise you on your communication with your creditors, leaving your credit score in shambles. Before making any decisions regarding how you intend on paying your creditors, you should speak with an experienced attorney. At the Law Offices of Chance M. McGhee, our bankruptcy lawyer advises his clients on how to make up for their debts, providing them with information about bankruptcy and valid alternatives. We work tirelessly to help our clients move forward from their financial burdens while steering clear of scams and empty promises. For help determining your path of recovery, contact our San Antonio bankruptcy attorney at 210-342-3400 for a free consultation.

 

Source:

https://www.consumer.ftc.gov/articles/0145-settling-credit-card-debt

 

 

Paying Unpaid Child/Spousal Support before Bankruptcy

July 6th, 2020 at 7:00 am

Before filing bankruptcy, should you pay child/spousal support debt in the meantime? This may depend on whether you file Chapter 7 or 13.


Our last three blog posts have been about what you should and should not do before filing bankruptcy. Three weeks ago we focused on keeping your assets, especially any retirement funds, and collateral, such as home or vehicle. Two weeks we discussed whether to take on more debt, maybe to buy time and not need to file bankruptcy. And last week we looked at whether you should file any unfiled income tax returns, and pay income taxes.

Today the question is whether to pay unpaid child/spousal support before filing bankruptcy. As with all of these issues, there are some general principles worth getting to understand. But everybody’s situation is truly unique. So you really do need the help of an experience bankruptcy lawyer to apply these principles to your personal situation. This blog post can be the first step towards becoming well-informed about your options. It’ll help you ask the right questions so that you can make the best decisions.

Child/Spousal Support Collection

If you haven’t already learned the hard way, the collection of child and spousal support can be extremely aggressive. If you are behind on support, your ex-spouse and the support enforcement agency have tremendous tools to use against you to make you catch up.

In virtually all states an ex-spouse—or the local support enforcement agency—has extraordinary ways to collect unpaid support.  

These include ways of grabbing your money directly. We’re talking garnishing your wages and bank accounts, and grabbing income tax refunds.

But the collection tools also include ways to hurt you so that you’ll be forced to pay. Your ex-spouse and support enforcement can often put liens on your possessions and your real estate. Your ex-spouse/support enforcement might then take these assets to sell and pay the support debt. They can often suspend your driver’s license. This includes a commercial driver’s license, so you can’t work if have a job requiring the license. They can even suspend your professional or occupational license. That could prevent you from legally working in your profession or business as a nurse, doctor, physical therapist, lawyer, realtor, insurance agent, mortgage broker, etc.

On top of all this, you could lose your hunting, fishing, boating and other recreational licenses. You could even be ineligible to receive a U.S. passport.

Bankruptcy Doesn’t Discharge Unpaid Child/Spousal Support

No form of bankruptcy can discharge (legally write off) unpaid child/spousal support. So you might as well prioritize paying the support, right? Maybe.

Stopping Support Collection

Also, Chapter 7 “straight bankruptcy” does not directly stop, or even pause, any of the above forms of support collections. Even more reason to put every dime into catching up on the support, right?

Maybe. But first be aware that Chapter 13 “adjustment of debts” CAN stop the collection of unpaid support. Furthermore, a Chapter 13 official payment plan can give you 3 years, or often as much as 5 years to catch up on any child/spousal support. Under the right circumstances you can be protected from support collection throughout those years of catching up.

So when on the brink of bankruptcy, it might make practical sense to not pay a support payment. It may make sense to pay that unpaid support over time instead. You might need to use your precious money for some other extremely urgent purpose.

This may be sensible if you are currently not being hit with ongoing support collection efforts. It would also be important that you don’t have reason to believe such efforts are imminent. Given how aggressive those efforts can be, this is a delicate calculation.

Determining Whether Chapter 13 Is Right for You

Be aware this particular scenario of not paying support only makes sense if you end up filing under Chapter 13.

As stated above, only Chapter 13 stops the collection of unpaid support arrearage. The more common Chapter 7 type of bankruptcy does not.

(Note that your obligation to pay ongoing monthly support after filing the Chapter 13 case continues. So collection of the ongoing monthly support can continue.)

Only Chapter 13 gives you a protected and extended method of catching up on your unpaid support. Chapter 7 leaves you at the mercy of your ex-spouse/the support enforcement agency, and their collection tools listed above.

The decision whether to file a Chapter 7 vs. Chapter 13 one is always a multi-faceted one. The Chapter 7 procedure itself is usually less expensive and takes much less time. But Chapter 13 gives you much stronger tools, not just with unpaid child/spousal support. If you’re behind on a mortgage, are in a difficult vehicle loan, owe income or property taxes, and many other challenging situations, Chapter 13 can work legal miracles.

Whether these powerful tools are worth the extra money and time is a multi-faceted decision. It’s one that definitely requires legal advice.

An Urgent Decision

By its very nature, whether or not to pay a child/spousal support payment is a very urgent decision. If you are in the midst of support collection efforts, those efforts are likely causing you significant financial pain. If that’s not happening yet, they can occur at virtually any time. You have to make some big decisions quickly.

The initial meeting with a bankruptcy lawyer is usually free. The sooner you get that initial legal advice the sooner you’ll know whether you should pay the child/spousal support. The sooner you will feel the relief of knowing where you’re heading. The sooner you will be turning the corner to a calmer financial life.

 

How Do I Know if I Should File for Bankruptcy?

July 1st, 2020 at 7:46 pm

Texas bankruptcy attorney, file for bankruptcy in TexasFor many people, the thought of filing for bankruptcy is a scary one. However, for many people, filing for bankruptcy is the best thing they could do for their finances. Filing for bankruptcy allows you to wipe your slate clean and discharge most of your unsecured debts, but it does come with some consequences. Filing for bankruptcy might make your life more difficult in the future, by making it harder to borrow money, lowering your credit score or even affecting your insurance rates. It can be difficult for some people to gauge whether or not bankruptcy is in their best interests, which is where a skilled Texas bankruptcy lawyer can help.

Your Debts Far Exceed Your Income

Think about all of your different types of debt: your mortgage or rent, car payment, all of your different credit cards, and personal loans. How much total debt do you have? Now, think of your income. How much money do you bring in each month? If your monthly debt obligations are much higher than the amount of money you bring in, you may want to consider filing for bankruptcy.

You Face Foreclosure or Repossession of Your Home or Car

Another big reason why people file for bankruptcy is that they are currently experiencing or being threatened with a foreclosure or repossession. When you purchase an expensive object, such as a home or vehicle, it is unlikely that you will buy it outright. Rather, you borrow the money from a lender and repay it over time. If you fail to repay your loan, your property could be taken back. Filing for bankruptcy puts a temporary halt to any foreclosure or repossession actions, giving you time to readjust your finances.

You Have Tried Negotiating with Your Creditors

If you are considering bankruptcy, you have likely already looked at other options for debt relief. One of the easiest things you can do to help lessen the burden is contacting your debtors and seeing if they are willing to work something out with you. Many lenders do not get anything if you file for bankruptcy and will want to work with you, but this is not always the case. If your creditors are unwilling to negotiate or you are still having trouble, bankruptcy might be your best option.

Discuss Your Situation with a San Antonio, TX Bankruptcy Lawyer

Bankruptcy is not for everyone, but for many people, it can give them a second chance with their finances. If you are in debt and are wondering if bankruptcy is right for you, you should speak with a knowledgeable Boerne, TX bankruptcy attorney. At the Law Offices of Chance M. McGhee, we will look over your financial situation with you and determine whether or not bankruptcy would be in your best interests. To schedule a free consultation, call us today at 210-342-3400.

 

Sources:

https://www.investopedia.com/articles/pf/08/bankruptcy-filing.asp

https://www.thebalance.com/should-you-file-bankruptcy-960627

https://www.moneyunder30.com/when-you-need-to-file-bankruptcy

 

The Best Bankruptcy Advice: Get Legal Advice

June 8th, 2020 at 7:00 am

Businesses considering bankruptcy get intense legal advice before filing. You would also be smart to get solid advice to make a good decision. 


What Businesses Do Before Filing Bankruptcy

The following are just a few of the companies which have filed business bankruptcy in the last couple months:

  • Pier 1 Imports
  • CMX Cinemas
  • J. Crew
  • Gold’s Gym
  • Neiman Marcus
  • JC Penney
  • Hertz
  • Tuesday Morning

Some of these companies will completely go out of business, some will continue on after a financial restructuring.

What they all have in common is that they got lots of legal advice before deciding to file bankruptcy. They likely got that advice over the course of many months. They likely used that advice to try to avoid entering into bankruptcy, take steps to position themselves for filing, and then to time the filing as well as possible.

If Bankruptcy Is Even a Possibility, Get Immediate Legal Advice

That likely applies to you if you are reading this. If there is even just a chance you need to file bankruptcy, you should get legal advice for similar reasons. You would be wise to get legal advice to find out:

  1. if bankruptcy is the best option for you, and how to pursue other alternatives
  2. how Chapter 7, 11, 12, and 13 work, and whether either are right for you
  3. what actions you should take to position yourself for either a possible or definite filing
  4. what you should avoid doing
  5. the best timing for your bankruptcy filing

1. Bankruptcy or Other Alternatives?

Bankruptcy may feel like an option of absolutely last resort. Sure, it’s something to avoid when possible. But that doesn’t mean you should avoid finding out about it.

Bankruptcy is a tool. It’s a legal tool provided for in the U.S. Constitution (Article I, Section 8, Clause 4) and federal law to provide you financial relief.

It may be right for you, either now or at some point in the near future. Or it may not be. You would feel better knowing one way or the other.

2. The Different Chapters of Bankruptcy

Chapters 7, 11, 12, and 13 are each very different. They are designed for very different circumstances.

If you own a business, generally Chapter 7 is for closing down your business, Chapter 11 is for reorganizing it. Chapter 12 is essentially a Chapter 11 for farmers and fishermen.

If you are instead of consumer debtor your two options are usually either Chapter 7 or Chapter 13.

Chapter 7 is sometimes called “straight bankruptcy.” It takes only 3-4 months, usually you keep what you own and can “discharge” (legally write off) most debts. But Chapter 7 is very limited in how it deals with certain important debts. With secured debts (home mortgage and vehicle loans) you either keep current or lose the house/vehicle. Also, Chapter 7 doesn’t help much with debts that you can’t discharge, like recent income taxes, child/spousal support, and such.

Chapter 13 “adjustment of debts” is much more flexible, especially with secured and other special debts. But it takes much longer—usually 3 to 5 years. That extra time is what provides much of the flexibility. You and your bankruptcy lawyer put together a payment plan, mostly for dealing with the secured and special debts. There’s a plan approval process and then you pay according to the plan for as long as it lasts. Chapter 13 can often give you tremendous power over your secured and special debts.

In relatively straightforward situations, Chapter 7 provides immediate and lasting financial relief. In situations with more diverse debts, Chapter 13 also provides immediate, and more flexible and powerful relief with those debts especially.

Interim Conclusion

More on what to do, what not to do, and the timing of bankruptcy coming up in our next blog posts. In the meantime…

As bankruptcy lawyers we are genuinely in this to help people. We love it when we can provide real solutions for our clients’ serious financial dilemmas. So it’s sad when people come in to see us who would have significantly benefitted from coming in earlier.

Please get in touch with your bankruptcy lawyer as soon as bankruptcy becomes a possibility. Doing so will give you the peace of mind that comes from

  • knowing that you have some really helpful options, often better than you thought
  • learning how to either avoid bankruptcy or position yourself in the best way for it
  • establishing a trusting relationship with your bankruptcy lawyer
  • knowing that you are avoiding taking seemingly sensible but actually unwise actions
  • taking charge of your life instead of living in fear

There is no downside for getting legal advice when you’re hurting financially. The initial consultations are almost always free. It may well be the single best decision you could make now.

 

Call today for a FREE Consultation

210-342-3400

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