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Recent Blog Posts
Can My Texas Bankruptcy Discharge Be Denied?
One of the last things that happens in the bankruptcy process is having your debts officially discharged, or forgiven. In other words, a discharge is the official release that you get when you are no longer personally liable for specific debts after you file for bankruptcy. A discharge requires all creditors to permanently stop any collection action against discharged debts, including legal action and phone calls or letters sent to your home. Discharge is the main goal of most people who file for bankruptcy, but is there is a possibility that your discharge could be denied?
Reasons for a Discharge Denial
Most of the time, a person who files for a Chapter 7 or Chapter 13 bankruptcy will have his or her case end with a discharge. In some cases, however, you can receive a denial for your discharge, which can be both stressful and debilitating to some. Here are a few reasons why your discharge may be denied:
An Example of Money Saved through Vehicle Loan Cramdown
Here’s an example of vehicle loan cramdown that shows how you can reduce your vehicle payments and be free and clear after paying less.
Our last 3 blog posts have been about Chapter 13 cramdown of a vehicle loan. Cramdown can reduce your loan’s monthly payments, its interest rate, and the total you pay for your vehicle. Often you end up saving a lot both monthly and on the total paid.
The last three blog posts introduced how cramdown works, how to qualify for it, and how you don’t have to catch up on late payments. But like anything, explaining a bunch of rules only goes so far. Showing how the rules actually get applied can be the best way to make sense of a complicated concept like cramdown. A good example is like a picture: it’s worth a thousand words.
So today, how does cramdown work in real life?
The Facts of Our Example
Let’s say you are a payment behind on your vehicle loan. You’re about to miss a second payment, and you’re feeling desperate. You have made making your vehicle payments a priority but you have other debts that are putting intense pressure on you. Your vehicle is absolutely essential in your life so you know you have to do something.
Creditor Harassment after Bankruptcy
Making the decision to file for bankruptcy is not an easy one. For the most part, bankruptcy is entered as a last resort when no other options have worked to help you get out of debt. Once you enter into the bankruptcy process, your creditors -- or the people you owe money to -- are no longer permitted by law to continue to try to collect on your debt. This does not stop some creditors -- some continue to try to collect on debts. More often than not, when a creditor contacts you after you have filed for bankruptcy, it is a simple mistake. In some situations, creditors may continue a second or third time to collect on your debt -- this is when you may be able to take legal action against your creditor for illegal harassment.
The Automatic Stay
The moment you file your bankruptcy case, something called the automatic stay goes into effect. The automatic stay is a federal injunction that prohibits creditors, collection agencies and government entities from attempting to collect on most debts. The automatic stay prevents creditors from:
Cramdown Your Vehicle Loan if Behind on Payments
Vehicle loan cramdown doesn’t just likely reduce your vehicle payments and the total you pay. You’d also not have to catch up on late payments.
Our last two blog posts have been about lowering monthly vehicle loan payments through Chapter 13 cramdown. This also often reduces the total that you pay on the loan until your vehicle is free and clear. Cramdown often even reduces the interest rate you pay. So it usually saves you money both every month and long term.
If you’re behind on your payments there’s an even more immediate benefit. If you qualify for cramdown, you don’t have to catch up on any late payments. This frees up the money immediately for other urgent needs. This is a huge monetary benefit at a time when your cash is likely extremely tight.
On top of this financial benefit, you get the peace of mind that your vehicle won’t be repossessed. Vehicle lenders can be quick to repossess when you fall behind, especially if your payment history has been spotty. It’s great to prevent a repossession, and then not have to scramble to catch up on the missed payments.
Qualifying for a Vehicle Loan Cramdown
To qualify for a Chapter 13 vehicle loan cramdown, mostly your loan must be at least two and a half years old. There are exceptions to this.
Last week’s blog post was about lowering monthly vehicle loan payments through Chapter 13 cramdown. This also often reduces how much you end up paying on the loan, and often even reduces its interest rate. Cramdown usually saves you money both immediately and long term. And you end up owning your vehicle free and clear at the end of your Chapter 13 case.
Today we get into how to qualify for cramdown.
Qualifying for Cramdown—Timing
You can only do a cramdown if your vehicle loan is more than 910 days old when you file your Chapter 13 case. 910 day is about two and a half years. If you entered into the vehicle loan less than 910 days earlier, you can’t do a cramdown. You can’t reduce the monthly payments or the total amount paid on the loan.
The Bankruptcy Code says that you can’t do a cramdown if “the debt was incurred within the 910-day [period] preceding the date of the filing of the [Chapter 13] petition.” See the “hanging paragraph” following Section 506(a)(9) of the U.S. Bankruptcy Code.
The Role of a Bankruptcy Trustee
Coming to the decision that your best option is to file for bankruptcy is not easy. You may have taken weeks, if not months to realize that your best option is bankruptcy. The bankruptcy process can be confusing because of all of the legalities and people involved with the process. When you file for bankruptcy, the United States Trustee Program will assign you a bankruptcy trustee who will be responsible for overseeing your case. The trustee is one of the most important people in your case, so it is crucial that you understand the role of the trustee and the impact the trustee can have on your case.
What Is a Bankruptcy Trustee?
The role of a trustee was created to prevent the creditors and courts from having to be the ones responsible for collecting and distributing the property of those who file for bankruptcy. Trustees are independent contractors who are not employees of the bankruptcy court, but they must answer to the court and cannot take any kind of action until the court approves it. The trustee will evaluate and make recommendations pertaining to the demands of different debtors involved in the specific bankruptcy case they are assigned to.
Keep Your Vehicle through Cramdown
If you can’t afford to pay your vehicle payments even after writing off your other debts under Chapter 7, consider a Chapter 13 loan cramdown.
The last two blog posts have been about keeping your vehicle in a Chapter 7 case. Two weeks ago was about the benefits of reaffirming the vehicle’s loan. Last week was about possible ways of keeping the vehicle by making the loan payments but not reaffirming. These all assumed that you would keep on making the full monthly payments in order to keep the vehicle.
But what if you can’t afford the full monthly payments? Are there any other options if, even after getting rid of your other debt, you can’t pay the vehicle payments?
The answer: you may be able to reduce the vehicle payments through Chapter 13 cramdown. In fact, you may be able to significantly reduce the payments. And cramdown may give you some other huge financial benefits.
Reducing Monthly Payments through Cramdown
Keep Your Vehicle without Reaffirmation
Can you keep your vehicle without reaffirming its loan? Can you make the payments without reaffirming? What if you can’t afford the payments?
Last week we discussed keeping your vehicle in Chapter 7 by entering into a reaffirmation agreement with your vehicle lender. Through this agreement you exclude your vehicle loan from the discharge of debts. In return you get to keep your vehicle. You also get an early start on rebuilding your credit by making payments on and eventually paying off this loan.
We ended last week with two unanswered questions:
- Would you be able to keep your vehicle in a Chapter 7 case if you DIDN’T sign a reaffirmation agreement but just kept current on your payments and insurance?
- Are there any other options if you couldn’t afford the vehicle payments even after discharging your other debts?
We cover the first question today, the second one next time.
Risks to Avoid If You Can
Keep Your Vehicle by Reaffirming its Loan
If you want to keep your vehicle and still pay on its loan, file a Chapter 7 case to write off other debts and reaffirm the vehicle loan.
A Vehicle Loan is a Secured Debts
We started this series of blog posts on debts by introducing secured debts as follows:
Each of your debts is either secured by something you own or it is not. A secured debt is backed up by a lien, a legal interest of the creditor in some kind of property of yours. See Section 101(37) of the U.S. Bankruptcy Code.
Usually you know whether a debt is secured. For example, in the case of a vehicle loan the vehicle’s title states that your lender is the lienholder. That lien on the title makes the loan secured by the vehicle. That, together with the security agreement you signed, gives the lender certain rights over your vehicle.
What Not to Do Before Filing for a Texas Bankruptcy
For many people who have quite a bit of debt, bankruptcy is the best option. There are two types of bankruptcies that individuals can file for in the United States -- Chapter 7 and Chapter 13 bankruptcies. A Chapter 7 bankruptcy is one that discharges most of your debt and leaves you with a blank slate so you can rebuild your finances. A Chapter 13 bankruptcy is basically a reorganization of your debts -- you work with your debtors to come up with a repayment plan that works for you. In either of these scenarios, there are certain things that are big no-no’s. It is important that you avoid these common mistakes when filing for a Texas bankruptcy:
Lying or Withholding Information from Your Attorney
Though it may seem beneficial to lie or hide certain assets from your attorney, it is quite the opposite. It is against the law to attempt to hide assets or omit them from your list of assets that you submit to the bankruptcy court. Not only could your bankruptcy case be rejected, but you can also face criminal charges related to bankruptcy fraud.
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