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Recent Blog Posts
Smart Timing with the Presumptions of Fraud
You can avoid the presumptions of fraud, and so discharge more of your credit card debts, by timing your bankruptcy filing right.
This blog post continues a series about the smart timing of your bankruptcy filing started back in July. (It’s been interrupted by urgent blog posts related to the pandemic—about unemployment benefits and the federal eviction moratorium.) The last in this timing series was about how bankruptcy timing helps with income tax liens.
Important Examples of Good (and Bad) Timing
Since it’s been so long since we introduced this, here is a list of some of the main consequences of good and bad bankruptcy timing. Whether:
- the bankruptcy case includes recent or ongoing debts or not
- you have to pay an income tax in full, in part, or not at all
- you must pay interest and or penalties on an income tax because of a tax lien
- you can discharge (legally write off) a credit card debt, or a portion of it
Common Myths About Bankruptcy in Texas
At 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.
Federal Eviction Moratorium Update
The current federal eviction moratorium comes with a number of qualifications and conditions. Be aware of them. It’s a limited but helpful tool.
Our last three weekly blog posts have been about the new Agency Order temporarily stopping many residential evictions. This Order by the Centers for Disease Control and Prevention (“CDC”) went into effect on September 4, 2020. It expires on December 31, 2020, when all unpaid rent will be due and evictions can resume.
Three weeks ago we described this eviction moratorium. Two weeks ago we discussed how renters could get more benefit from the moratorium with a Chapter 7 “straight bankruptcy.” Last week we got into how Chapter 13 could help significantly more. This week we provide additional important practical information.
Chapter 13 and the Eviction Moratorium
Use Chapter 13 to catch up on back rent that piles up during the eviction moratorium, so that you can stay in your rental long term.
Our blog post two weeks ago was about a recent federal order temporarily stopping certain residential evictions throughout the country. Check out that blog post to see who is covered and how to take advantage of this eviction moratorium.
Asserting Your Right Not to Be Evicted
Assuming you qualify, you must act to assert your right not to be evicted. This mostly means you need to print up, review, sign, and give your landlord a two-page declaration form. Here is that Declaration form.
Does the Automatic Stay During Bankruptcy Apply to Child Support?
When you file for protection under the U.S. Bankruptcy Code, the bankruptcy court will automatically issue a stay that stops all collection activities by creditors. The automatic stay is a court order that prevents creditors from calling you, sending you letters, and otherwise pushing you to pay what you owe them. The stay is meant to be a form of relief that gives you the chance to get organized as you approach your bankruptcy proceedings. If you are subject to a child support order, however, it is important to understand that the automatic stay will not help you with that particular obligation.
How the Automatic Stay Works
Whether you are filing Chapter 7 or Chapter 13 bankruptcy, the bankruptcy code recognizes that you will need time and space to sort out your thoughts and to prepare for the proceedings without creditors bothering you at all hours of the day. The automatic stay is meant to give you that time and space. The stay also serves as the proverbial “line in the sand” as well, meaning that once the stay is issued, collection efforts cannot resume until the bankruptcy proceedings are complete or the creditor obtains the express permission of the bankruptcy court to contact you again. In the meantime, you will not be at risk of foreclosure, eviction, wage garnishments, or even having your utilities shut off.
Bankruptcy and the Eviction Moratorium
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... .”
New Federal Eviction Moratorium
The Centers for Disease Control and Prevention (CDC) just asserted its COVID-fighting power to stop most residential evictions through 2020.
On Friday, September 4, 2020, a federal order went into effect temporarily stopping certain residential evictions throughout the country. Issued by the Centers for Disease Control and Prevention (“CDC”), it’s titled “Temporary Halt in Residential Evictions To Prevent the Further Spread of COVID-19.” The legal basis and purpose of the Order is “to temporarily halt residential evictions to prevent the further spread of COVID-19.”
It covers residential rentals, NOT home mortgage foreclosures.
The Renters Covered by this Order
The CDC Order states that any “landlord... shall not evict any covered person from any residential property... during the effective period of the Order.”
Which Type of Bankruptcy Is Best for My Financial Situation?
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.
States' Reactions to Trump's Unemployment Benefits Extension
How are states responding to Trump’s Memorandum providing $400 (or maybe $300?) weekly extended unemployment benefits? It varies widely.
Last week we explained the President’s Memorandum of August 8 which extended reduced federal unemployment benefits. The $600 weekly benefit had expired on July 31. The House of Representatives had previously passed a bill extending the $600 benefits into early next year. The Senate had proposed to extend the benefits but at only $200 weekly. The two Houses of Congress were not resolving their differences. Then the Memorandum directed the Federal Emergency Management Agency (FEMA) to fund supplemental unemployment benefits out of its Disaster Relief Fund. This was to cover $300 of a $400 weekly benefit. The remaining $100 weekly was to come from the states.
Trump's $400 Weekly Unemployment Benefits Extension
Trump’s Memorandum Providing $400 Weekly Unemployment Benefits from August to December Is Complicated.
A Quick History
The CARES Act’s $600 per week additional federal unemployment benefits expired on July 31, 2020. Section 2104 of the CARES Act. Back in May the U.S. House of Representatives had passed the HEROES Act extending these $600 benefits through January 31, 2021. Section 50001 of the HEROES Act. Then on July 27 the Senate announced its HEALS Act; it reduced the additional federal benefit to $200 per week. (This was to last through September, and then transition into a total unemployment amount of 70% of lost wages.) The Senate bill did not come up for a vote in the Senate. Intense efforts to reconcile the House of Representatives’ HEROES Act and the Senate’s HEALS Act have so far gone nowhere.
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