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Social Security Income and the Means Test

When filing a Chapter 7 or 13 bankruptcy, a debtor must show that he passes the means test. The means test is basically a series of calculations that are supposed to show, in theory, whether or not the debtor has enough income to be able to pay back his creditors. To perform the means test, one must determine what the debtor’s income is. Almost all sources of income are to be taken account of on the means test. The amount of the income is determined by taking the six month average of the debtor’s various sources of income.

Social Security Income gets special treatment on the means test. It can be completely excluded. That means that Social Security Income does not have a negative impact when the means test is used to determine if someone may qualify for a Chapter 7.

The means test is not the only determining factor on what type of bankruptcy a person is allowed to file. The actual budget of a person is taken into consideration as well. This budget is represented on Schedules I and J. If Schedule J, shows a substantially positive amount, chances are that the debtor will not be able to qualify for a Chapter 7.

Social Security Income can also be excluded from a debtor’s budget. Therefore, it will not have an impact on a person’s qualification for a Chapter 7 here either.

If an individual wishes to file a Chapter 13, he may elect to include their Social Security income on his budget, so that he can show he does have enough income to afford a repayment plan.

 

By Kristen Whelchel

What is a Bankruptcy Trustee and what does it have to do with my Bankruptcy Case?

When you file a Chapter 7 bankruptcy, not only will you be working with an attorney, you will also work with bankruptcy trustee. While you will be working closely with your attorney throughout the whole filing process, you will not meet the trustee until the meeting of the creditors (also known as your 341 hearing).

The trustee is a third party, appointed by the United States Trustee, she herself is not a government employee. She does not represent you and she does not represent your creditors. The trustee represents the bankruptcy estate, and has several duties in doing so.

The trustee’s duties include:

  1. Conducting the meeting of creditors;
  2. Investigating your assets and claimed exemptions;
  3. Checking for fraud or inaccuracies and making objections when appropriate;
  4. Reviewing your right to a discharge;
  5. Sending any required notices related to domestic support obligations;
  6. Determining whether there any non-exempt assets to liquidate and distribute amongst your creditors;
  7. Gathering, protecting and preserving any non-exempt assets of the estate, or
  8. Ensuring statement of intention provisions are followed;
  9. If applicable, filing a report stating that no assets have been found

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Should I Cash Out My Retirement Account to Pay Off Debt?

Taking withdrawals from an IRA before you’re retired is something you should do only as a last resort. There are a few reasons why.

If you withdraw money from a traditional IRA before you turn 59 ½, you must pay a 10% tax penalty in most cases, in addition to regular income taxes. Plus, the IRA withdrawal would be taxed as regular income, and could possibly push you into a higher tax bracket, costing you even more.

Though the federal government allow you to withdraw contributions from a Roth IRA without incurring a penalty, you will owe a penalty (and taxes) if you withdraw the earnings on those contributions.

In addition, money you take out of an IRA cannot be replaced, since you would still be restricted to yearly contribution limits for future years. So even if you withdraw only a small amount, factor in the years of compounding interest you would be forgoing, and that small withdrawal could end up costing you a small fortune in your golden years.

In both Chapter 7 and Chapter 13 bankruptcies, IRAs, 401(k)s, and most retirement accounts are protected. This means you have the possibility of discharging your debt while still having a nest egg for your retirement. Before you cash out your accounts to pay off debt, set up an appointment with Hoglund Law Office where an experienced bankruptcy attorney will meet with you to discuss the possibility of bankruptcy as a viable option rather than losing the money you’ve worked hard to set aside for retirement.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Utility Services and Bankruptcy

Many people who file bankruptcy are behind on their utility bills. Some are being threatened with a utility shut off in the near future. If this is the situation you are in, the good news is that filing a bankruptcy case can stop a person’s utilities from being shut off. In addition, public utilities cannot refuse to provide or cancel service because you have filed a bankruptcy case.

In a chapter 7 bankruptcy case, most types of unsecured debt will be discharged, or wiped out, through the bankruptcy. Utility bills are considered an unsecured debt, and as a result, will be discharged along with a person’s other debts.

However, this doesn’t mean that you will not have to pay utility services after you file your bankruptcy case. The bankruptcy will not discharge current or future utility bills. In addition, a utility company can require you to pay a deposit for future service. If your utilities had been disconnected, the service provider can also charge you a reconnect fee. If you fail to make utility bill payments after your bankruptcy case is filed, your utilities will eventually be shut off.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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What Happens to Secured Debts after Bankruptcy?

A “secured debt” is any type of debt that you obtain by agreeing to give the lender an interest in some type of property in exchange for the loan (also commonly referred to as collateral). The most common types of secured debts include car loans and mortgages.

Many people wonder if they will still owe secured debts after filing bankruptcy. The answer to this is yes and no. Filing bankruptcy gets rid of your legal obligation to repay the debt, meaning that the creditor can’t sue you to get paid. However, the creditor can still take bank their collateral if you don’t pay the debt. This means that if you don’t pay for your mortgage or car loan, the lender can’t sue you, but they can repossess your car or foreclose on your home.

For this reason, if you want to keep property that you pledged as security for a debt, it is important that you continue to make payments for it during and after your bankruptcy case. Some lenders may also require you to sign paperwork agreeing to be legally responsible for the debt after the bankruptcy (called a “reaffirmation agreement”). If you have any questions about how your secured debts will be treated after filing bankruptcy, speak to your bankruptcy attorney about it.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Medical Debts and Bankruptcy

Overwhelmed with medical debt? If you have incurred medical debt due to illness or having medical procedures without insurance, a Chapter 7 bankruptcy can help you get rid of your debt. Many people are mistaken in thinking they are only able to file bankruptcy on consumer debts such as credit cards or unsecured loans, but medical debts are also included in bankruptcy.

Medical debts can be tantamount to credit card debt for a lot of people and many hospitals and clinics pursue these debts vigorously.In Minnesota, hospitals and clinics are able to collect medical debt from both spouses even if the debt is only incurred by one spouse, which can create issues if your family members have medical issues. Bankruptcy can help you avoid harassment, lawsuits and garnishments and bank levies on behalf of hospitals and clinics.

Many times, people suffering from illnesses or medical debts will be out of work and unable to keep up with their hospital bills and regular living expenses. Hoglund law can help! Please schedule a free consultation with one of our experience bankruptcy attorneys to discuss how we can help you through a medical bankruptcy.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Can I Get Rid of my Medical Debt Through Bankruptcy?

You may be wondering whether or not you can discharge your medical debt through bankruptcy. The short answer is, yes. Many individuals have circumstances that lead to high medical bills that they’re unable to pay, a burden that can be completely cleared with a discharge of a chapter 7 bankruptcy.

Medical debts are considered unsecured non-priority debts, meaning they’re entirely dischargeable in a chapter 7 bankruptcy. Once these debts are discharged, you are no longer responsible and creditors may no longer come after you. In order to qualify for a chapter 7 bankruptcy, you need to pass an income means test. This means you (and your spouse if applicable) need to satisfy certain income requirements in order to be eligible for chapter 7 relief. This is something your attorney at Hoglund Law will be happy to analyze with you at your free bankruptcy consultation meeting.

It is important to keep in mind that your chapter 7 bankruptcy will only discharge debts that are outstanding at the time of filing. If you know that you are soon to be incurring significantly more medical debt, it may be worth waiting to file until after that happens. It’s also important to keep in mind that you may only be granted relief under a chapter 7 bankruptcy once every 8 years.  This means, if your medical care or the medical care of your family is ongoing, or you know a large expense is coming soon, you may want to wait until treatment is complete before filing for bankruptcy.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Filing a Statement of Intention

When filing for bankruptcy under Chapter 7, protection of certain assets requires more than just listing them under the applicable exemptions. For example, a homestead may be subject to a mortgage or a vehicle may serve as collateral for the repayment of a loan. In these situations, the debtor must file a Statement of Intention within 30 days after filing the Petition, or before the First Meeting of the Creditors, whichever is first. If the debtor is represented by an attorney, the attorney will typically file this form along with the Petition. On the Statement of Intention, the debtor must choose one of four options with regard to the asset. Surrender, redeem, reaffirm, or ride-through.

If the debtor is unable to make on-going payments toward repayment of the loan, he or she might have to surrender the asset. This means that the creditor may decide to repossess the asset. The good news, however, is that the repossession will wipe out the claim up to the value of the property, and the bankruptcy discharge will wipe out any outstanding balance.

If the debtor is able to come up with enough cash to “buy” the asset, he or she may pay the creditor the value of the asset, which will wipe out that amount of the claim (the secured amount). Any remaining balance on the claim will be unsecured and will be discharged. However, this is often difficult to accomplish because the redemption must be made in a one-time payment, rather than by installments.

If the debtor has equity in the asset, or will soon gain equity, it might be wise to reaffirm. This involves a written agreement with the creditor that also must be filed with the court. Under the agreement, the debtor becomes re-obligated to the debt, which removes the debt from the bankruptcy case. The upside is that the creditor must then report timely payments to the debtor’s credit report, which re-builds the debtor’s credit score. The downside is that if the debtor later defaults and the creditor repossesses the property, the debtor will still be obligated on the remaining balance.

Finally, the debtor may choose to ride-through. Here the debtor will continue to make regular payments as with reaffirmation, but there is no written agreement re-obligating the debtor to the debt. This means two things: First, the creditor is not required to report to the credit report. Second, if the debtor later loses the property, the remaining debt falls back into the bankruptcy case and is discharged. It also should be noted that some lenders do not allow ride-through.

The assets that are subject to the Statement of Intention requirement are often highly important to the debtor, if not necessary to his or her post-bankruptcy financial growth. Deciding which option to choose takes thorough planning and prioritizing, as well as knowledge of the law.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Student Loans and Bankruptcy Law

In today’s tough job market, people with higher education degrees are finding it difficult to obtain work. Many of these people also have significant student loan debt. Student loan payments can be extremely difficult to make, especially if a person is not receiving any income. There are many options available to help people with government backed, and even some private, student loans. The main options are deferment, income-based & income-contingent repayment plans, and extended repayment periods. These options can go a long way towards helping a person who doesn’t have a job or someone who had to take a lower-paying job than they expected. However, the deferment periods are of a limited duration and income-sensitive plans can really draw out the length of time a person spends in repayment. Individuals who remain in financial difficulty even after utilizing these options may consider filing bankruptcy.

For those individuals, it is important to know that Congress has determined that student loans are not eligible for discharge in Chapter 7 or Chapter 13 bankruptcies unless a person is able to demonstrate to the satisfaction of the bankruptcy court that the loans create an undue hardship on the person and the person’s dependents. Student loans can be included in a Chapter 13 payment plan, which can reduce the size of the payments and stop the collection activity, but any amount that remains at the end of either the 3 or 5 year plan is not discharged unless the undue hardship standard is met. As a result of this Congressional stance on student loan repayment, individuals seeking relief from overwhelming student loan debt should consult an attorney before filing bankruptcy.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Keeping Your Car and Home if You File bankruptcy

Many people worry that they will lose their homes or cars if they file bankruptcy. However, in most cases, this is not true and an individual who files bankruptcy will be able to keep his or her home and car. This is because state or federal exemptions can be used to protect a certain amount of equity that a person has in his or her car and home.

In a chapter 13 bankruptcy, a debtor may be able to keep secured property by paying the creditor the value of any equity he or she has in the property. A chapter 13 bankruptcy can even be used to stop a car repossession or home foreclosure by allowing a debtor to catch up on back payments and become current with the loan.

In a chapter 7 bankruptcy, people can also generally keep their homes and cars. However filing bankruptcy will not get rid of the security interest that a lender has in the property. This means that although a person’s legal obligation to repay the loan goes away after a bankruptcy, the lender can still take back the property if the person fails to continue making payments on the loan. A person who wants to keep his or her car or home after bankruptcy can keep the property by either signing a reaffirmation agreement with the lender, continuing to make voluntary payments on the loan, or by paying the lender the value of the property. The best option depends on the individual’s unique set of circumstances.

If you are considering filing bankruptcy and have questions about protecting your home or car, contact a local bankruptcy attorney for help.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Discharging Tax Debt in your Chapter 7 Bankrutpcy

People filing for chapter 7 bankruptcy protection often wonder whether or not their income tax debts will be discharged. The good news is tax debts are dischargeable if certain criteria are met.

First, if you want to discharge your tax debt you must have filed returns for the years you owe. Second, the returns were filed at least two years prior to your bankruptcy filing date. Third, the returns in question were due at least three years before you file. Fourth, the IRS or State has not assessed your tax liability within 240 days before the filing. Finally, you did not willfully attempt to evade paying taxes.

However, other types of tax liabilities have different rules. Property taxes are not discharged during Chapter 7 Bankruptcy unless they became due more than a year before your file for bankruptcy. Further, debts incurred to pay taxes cannot be discharged. For example, if you use a credit card to pay your taxes you will have to pay back the creditor who issued the card even if all your other debt is discharged. Finally you may be wondering if tax obligations are dischargeable if you filed late tax returns. The answer is it depends. For a long time the IRS would not allow any taxes owed on late returns to be discharged. However, now the IRS only applies this no-discharge rule to late returns if they were filed within two years prior to your bankruptcy filing.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Can Bankruptcy Help Me with Tax Debt?

Tax debt can be a huge burden for many people. What a lot of people do not know is both Chapter 7 and Chapter 13 bankruptcies can help consumers with tax debt owed to the IRS.  First, it is important to understand the basic differences between the two types of consumer bankruptcy and how tax debt is handled in the different bankruptcy processes.

A Chapter 7 bankruptcy is a great option for people who are unable to make payments on their debt, and are looking for a fresh start to get rid of their unsecured credit cards, medical debts, judgments and other deficiency balances or overdrawn accounts. In a Chapter 7, most tax debt accrued 3 years prior to filing bankruptcy is also dischargeable.

A Chapter 13 bankruptcy is a great option for people who have a little extra income each month that allows them to pay back a portion of their debt to their creditors in a bankruptcy. A Chapter 13 bankruptcy also allows the consumer to pay back any tax debt they owe in more recent years through a manageable monthly payment in the bankruptcy.

Tax debt can be a large portion of a person’s debt and can be the deciding factor in why they ultimately choose bankruptcy as an option to get a fresh start from past debts.  The professional bankruptcy attorneys at Hoglund Law Office are happy to sit down with you to discuss and review your tax debt and discuss your bankruptcy options. Please contact our office to set up a no-cost consultation.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Bankruptcy and Credit Scores

A credit score is a reflection of your credit history. Filing a bankruptcy will show up on your credit report and be reflected in your score. However, this is not as bad as one might think. Most people that file bankruptcy already have negative credit reporting affecting their credit score, so a bankruptcy doesn’t actually lower their score by much. Another consideration is that filing bankruptcy puts a person in a different “peer group” for purposes of determining a credit score. “Peer groups” are used by FICO to compare consumers against other consumers in similar situations. Bankruptcy filers are a separate group. Once a person files, their credit worthiness will be compared to other people who have also filed.

When someone with a low credit score decides that they want to improve their score, they need to know how to go about doing so. Doing things like opening new lines of credit or closing existing accounts to improve your credit score will do very little to improve your score in the short term. Simply put, you have the power to create the credit score that you want to have, you just need to have patience and put in the effort over time. The most important factor is simply to make payments to your creditors on time every time. However, there are other things you can do to help build a solid credit history. Keep balances low on revolving lines of credit, such as credit cards, and open new credit accounts only when you have to. Be wary of offers to move debt from one credit card to another, it is better to pay off debt than to transfer it. Remember that there is no quick fix to improving a credit score and don’t believe anyone who tells you different.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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How Does Bankruptcy Affect My Credit?

Many individuals fear that filing a bankruptcy will hurt their credit score and prevent them from getting further credit. While there are many factors involved in a company’s decision to provide financial products to an individual that has filed bankruptcy, it is important to remember that persistence will pay off in the long run and knowing your options is key.

It is important to understand the time frame that is involved when filing either a Chapter 7 or a Chapter 13 bankruptcy and how that will affect your ability to repair your credit. Typically, it takes anywhere from one to three years to repair your credit after a bankruptcy has been filed.

One common misconception is that filing a Chapter 13 bankruptcy will affect your credit less than a Chapter 7 because you are paying off your creditors. In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time, from three to five years, depending on the size of your debts and income.  A Chapter 13 bankruptcy affects your credit score the same way that a Chapter 7 does, only the time frame for credit repair is greater because you are in the bankruptcy process for three to five years while you are paying off debt to your creditors.

A Chapter 7 bankruptcy, on the other hand, discharges many of your debts and can be filed within a few months. Therefore, the process is much shorter, and the time it takes to repair your credit is less.

It is important to understand your options and how bankruptcy will affect your credit. Knowing your options is crucial to alleviate your fears and misconceptions about the bankruptcy process. Please contact one of our professional bankruptcy attorneys at Hoglund Law Office to discuss your specific situation and find out whether a Chapter 7 or Chapter 13 bankruptcy is right for you.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Sometimes Income Taxes Are Dischargeable In a Bankruptcy

As a general rule taxes are nondischargeable in a bankruptcy. However, in some circumstances, income taxes can be discharged in a bankruptcy. In order for income taxes to be eligible for a discharge in a bankruptcy, the taxes must have been filed for at least two years and the taxes must have been due and owing for at least three. For example, 2007 taxes became due and owing in 2008 and they can therefore be discharged after April 15th in 2011 assuming that they were filed on time in 2008. There are some qualifications to this. If certain events have occurred during the three year period, the taxes will not be discharged. For example, an assessment will cause the waiting period to be extended. There are a variety of other tolling events. It is best to get a professional opinion regarding the dischargeability of taxes before assuming that a bankruptcy will wipe out the obligation.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Student Loans may be the “Good” Kind of Debt

Although most people would like to have zero debt compared to much debt, student loan debt may not be as bad as other kinds.  With low interest rates and flexible payment options, Carolyn Bigda from the Chicago Tribune contends that student loans tend to be more forgiving than other types of debt.  However, the primary focus should not be what debt people should get into, but rather, consider saving before paying off loans.

On average 65 percent of students who attend a four-year private college and 56 percent of students who attend public universities end up raking in $28,100 and $22,000 in student loan debt respectively.  A recent graduate may be concerned with paying off that debt as soon as possible.  Doing just that may not be the best idea.  Saving more of your income compared to paying off student loans may be the wiser decision depending on a person’s future goals.  For example, if you would like to buy a home, purchase a car, or take a vacation once in awhile, having savings will help pay for these things without increasing total debt.  If there are no savings available to pay for these goals, financing them is the only other option, which ends up leading to greater debt.

While completely neglecting student loan debt is not an attractive option either, there are ways to save money and pay off that debt.  Private loans may be refinanced, and if the interest rates are still burdensome, targeting private loans first may be advisable.  In the case of federal loans, student loans may be consolidated and interest rates could be reduced as much as .5 percent.  Also new rules announced in October would result in a waiver of any remaining balance if after 20 years of repayment a student loan balance still exists.

Depending on ones circumstances and financial situation, it may be wise to consider saving over paying off student loan debt.  College graduates Philip Taylor and his wife, Teresa did just that.  They held off a bit on paying back their student loans, they saved, and were able to purchase a house, pay off their credit card balances, and start funding a retirement account.  When all was said and done, they had enough saving to pay back a huge chunk of their student loans.

 

Source:

Carolyn Bigda, Consider saving before paying off student loans, https://www.chicagotribune.com/business/yourmoney/sc-cons-1117-started-20111118,0,6457015.story (accessed 11/18/2011)

 

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Credit Cards After Bankruptcy?

Many individuals when filing a bankruptcy want to know if it is possible to simply leave a creditor out of the bankruptcy.  It is not. The law is very clear that all creditors must be included when filing a bankruptcy. It is often possible to essentially remove a secured creditor from a bankruptcy by signing a reaffirmation agreement. However, signing a reaffirmation agreement on a credit card is unwise and typically will not be approved.  All reaffirmation agreements must be approved by the judge in the case. It is extremely unlikely that any judge would approve a reaffirmation agreement for a credit card and very few attorneys would ever recommend reaffirming such a debt.

Once a person has finished a bankruptcy, it is not particularly difficult to get a new credit card.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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What happens when one signs up for credit counseling?

The typical credit counseling program is a repayment plan to unsecured creditors. Essentially, what a credit counselor does is negotiate a repayment plan with creditors. The plan will usually allow the debtor to pay less in interest to the creditors. Credit counseling will typically not provide for a reduction in the principle amount owed. The typical credit counseling plan lasts for five years. The payment is based upon the amount of debt owed to the creditors and the fees of the credit counseling agency.

There are a number of pitfalls involved in choosing credit counseling as an option to dealing with debt. The first issue involves the payment. Because the principle owed to the creditor is not reduced, the payments are often simply not affordable for many debtors. Also the payments are not flexible, if a person participating in a credit counseling program has a loss in income, the credit counseling payment remains the same. If a person can not make the payment, the person will be removed from the plan.

Another issue which frequently reeks havoc with credit counseling plans is that if all creditors do not agree to the plan, then those who do not agree are not bound to the plan and are free to continue to attempt to collect on the debt owed to them. For example, if one creditor holds out and is not being paid through the plan, that creditor could sue the debtor and then garnish the debtor’s wages which may make it impossible for the debtor to continue on with the credit counseling plan. It is not uncommon for a creditor to refuse to participate in a credit counseling plan especially if the creditor already has obtained a judgment against the debtor or if the debt has already been turned over to a collection agency.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Consumer Bankruptcies Decrease in July

Consumer Bankruptcies Decrease in July

According to the American Bankruptcy Institute, consumer bankruptcy filings in July were down 18% from July 2010. Nationally, 113,470 consumer bankruptcies were filed in July of this year. In July 2010, 137,698 consumer bankruptcies were filed. The decrease in July continues the downward trend in bankruptcy filings in 2011. The number of filings in July represents the seventh straight month in which bankruptcy filings were lower than 2010 filings.  July consumer bankruptcy filings were also down 5% from the number filed in June of this year.

Samuel J. Gerdano, the Executive Director of the American Bankruptcy Institute, has said that “the continued decline in consumer bankruptcies in tandem with a sluggish economy is a reflection of the deleveraging of household debts and tightening of consumer credit over the past year.” Total consumer bankruptcy filings for 2011 are expected to be lower than the number filed in 2010.

 

Source:

July Consumer Bankruptcy Filings Fall 18 Percent From Last Year, https://www.abiworld.org/AM/Template.cfm?Section=Home&CONTENTID=64221&TEMPLATE=/CM/ContentDisplay.cfm (accessed August 9, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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What is a deed in lieu of foreclosure?

What is a deed in lieu of foreclosure?

With so many individuals unable to afford to keep their homes, many people are looking for ways to walk away from their home.

One option is to do a deed in lieu of foreclosure. When a person signs a deed in lieu of foreclosure, the person is essentially signing the property over to the mortgage without forcing the mortgage company to go through a foreclosure to reclaim the property. When a property is foreclosed upon, the mortgage company must follow state laws which set up a number of steps a mortgage company must complete in order to take over possession of the property. This can be a drawn out process and typically the mortgage company will incur costs such as attorney’s fees when undertaking a foreclosure.

When an individual signs a deed in lieu of foreclosure that person is essentially giving the mortgage company permission to bypass the foreclosure process and take back possession of the property immediately.

Clearly, in this situation the mortgage company benefits by skipping over the expensive step of foreclosure; however, the property more quickly enters onto their books as a foreclosed property. Some mortgage companies have “Cash for Keys” programs that will offer financial compensation for owners willing to vacate their property more quickly.

The benefit for the homeowner in a deed in lieu of foreclosure is not as obvious. Many individuals believe that their credit will be spared by doing a deed in lieu of foreclosure. This is not the case. A deed in lieu of foreclosure can still adversely affect a person’s credit score.

In addition, when a person signs the deed in lieu of foreclosure that person is giving up his or her right to occupy the property during the redemption period. In Minnesota as in many states, a homeowner is allowed a time period after a sheriff sale to try to refinance the property or pay off the entire mortgage in full in order to keep the home. During the redemption period, the homeowner is entitled to keep possession of the home. In Minnesota, this period typically last 6 months. In certain circumstances it can last a full year. Essentially this means that a person can lose their home to a foreclosure and yet remain in the property until the redemption period expires. During this time the homeowner’s name remains on the title of the property and the homeowner is responsible for the property. The homeowner is not required to make mortgage payments on the property during this time and therefore has a chance to save up money that would have been spent on rent.

Signing a deed in lieu of foreclosure ends this right. It can however occasionally be in a homeowner’s best interest to sign a deed in lieu of foreclosure. For example, if an individual has already moved out of the property, having their name remain on the title is a liability for them if the property is not being maintained.  For example, if the lawn is not mowed, the city could cite the homeowner for the violation.

Another concern that an individual should have when considering signing a deed in lieu of foreclosure is whether the mortgage company will choose to go after the homeowner for a deficiency balance if the property subsequently sells for less than the homeowner owes the mortgage company. One should be wary about signing an agreement that makes them responsible for the difference.

Not all mortgage companies will willingly allow a homeowner to sign a deed in lieu of foreclosure straight away. Often the mortgage company will force the homeowner to put the property up for sale before considering the option of a deed in lieu of foreclosure. A homeowner may incur unnecessary costs in doing this.

Whether or not signing a deed in lieu of foreclosure is in a person’s best interest depends on a number of factors. Before making such a decision, an individual would be wise to consult with an attorney regarding their options.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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What is a short sale?

With today’s housing market many individuals find themselves in the unhappy position of owning a home where the balance owed to the mortgage company is far greater than the value of the home. Many of those finding themselves in this circumstance want desperately to get out from under the house.

One method used to accomplish this is selling the home to a buyer for less than the balance of the mortgage. This is referred to as a short sale.

Short sales can help an individual extricate themselves from a house, but there can be issues which arise from a short sale that are unexpected.

A short sale must be approved by the mortgage company. If there is a second mortgage, the second mortgage must also approve. It is often difficult to get a mortgage company to approve a short sale. One may invest a great deal of time in finding a buyer and setting up the sale only to have it fall through at the last minute. The process can be extraordinarily frustrating.

In addition, sometimes when a person sells a house on a short sale, the mortgage company will force the seller to sign a note agreeing to pay the difference between the short sale purchase price and the balance owed on the mortgage. This leaves the seller without the property and with a frequently large unsecured debt. More often than not, a person selling a home on a short sale will end up owing almost the entire amount of the second mortgage on the property as well.

Before agreeing to sign such a note, one should be aware that in Minnesota a mortgage company holding a first mortgage is only allowed to pursue an individual for the deficiency balance on the first mortgage in very limited circumstances if the property is foreclosed upon. Signing a note in a short sale would make the seller responsible for the difference between the sale price and balance when if the property had just been foreclosed on, the individual would have not been responsible for the difference.

A mortgage company does not have to have the seller sign a note for the difference. The mortgage company can elect not to pursue the difference and forgive the debt. If the mortgage company forgives the seller for the difference in sale price and the amount owed, there can be tax consequences. In certain circumstances the difference will be considered taxable income. Anyone planning on selling a house on a short sale would be wise to consult with a tax professional before agreeing to the deal.

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Supreme Court Rules Against Estate of Anna Nicole Smith

The Supreme Court recently ruled against the estate of the late model Anna Nicole Smith. In a 5-4 decision, the Court ruled that Smith was wrongly awarded $400 million from the estate of her late husband by a bankruptcy court. When she was 26, Smith married wealthy oil executive J. Howard Marshall, who was 89. Marshall died just one year later and left everything to his son Pierce. A probate court in Texas awarded the estate to Pierce after Smith sued. However, Smith filed for bankruptcy in California and made claims that Pierce withheld money that Marshall had promised her. The bankruptcy court agreed with Smith and awarded her $400 million.

The Supreme Court case addressed the conflicting rulings by the Texas and California courts. The Court held that the United States Constitution prevents bankruptcy courts from ruling on claims outside of bankruptcy law. This means the California bankruptcy court was prevented from granting damages on tort claims. Therefore, the ruling from the Texas court stands and Marshall’s whole estate was awarded to Pierce.

The parties involved in the case did not live to see the outcome. In 2007, Smith died from an accidental overdose. Marshall’s son, Pierce, also died while the case was pending.

 

Source:

Newscore, Estate of Anna Nicole Smith Loses at Supreme Court,

https://www.nypost.com/p/news/national/estate_of_anna_nicole_smith_loses_tdc2FYsQQPIXCPZkKnE3aI (accessed June 28, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Popular Restaurant Chains May Be At Risk For Bankruptcy

According to new research, popular food chains Denny’s, Wendy’s and Domino’s may be in danger of going bankrupt. TheStreet.com ranked restaurants’ chances of going bankrupt by their Altman Z-Score. The score is based on financial information from each company, and predicts the likelihood of bankruptcy within two years. TheStreet has been using their scoring system since 1968, and they claim to have a 72% rate of accuracy in predicting bankruptcies two years before the filing.

Denny’s is the restaurant most at risk for bankruptcy, according to the most recent ranking. Wendy’s/Arby’s came in second, and Domino’s Pizza was fifth. Additionally, DineEquity, which operates Applebee’s and IHOP, ranked fourth on the list. Other restaurant chains, including Sbarro, Perkins and Marie Callender’s, have already filed for bankruptcy this year.

 

Source:

Pete Kenworthy, Report: Denny’s, Wendy’s and Domino’s Among Restaurants in Danger of Bankruptcy, https://www.abcactionnews.com/dpp/news/national/wews-report-dennys-wendysand-dominos-among-restaurants-in-danger-of-bankruptcy1309574048690 (accessed July 3, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Regional Bank President Wants Tax Reform To Lower Debt

Narayana Kocherlakota, president of the Federal Reserve Bank in Minneapolis, recently suggested a change in the U.S. tax system to discourage debt growth. High consumer and bank debt lowers the stability of the economy. This makes economic trouble, like what occurred in 2007 through 2009, more likely.

Currently, the tax code encourages debt by allowing taxpayers to take advantage of interest deductions. Consumers are encouraged to incur mortgage debt and banks are encouraged to take on debt for financing. Kocherlakota urged Congress to reduce the deduction for mortgage interest and reduce the interest deduction for corporations. This would reduce the incentives for people to take on debt that destabilizes the economy.

Officials are attempting to avoid another economic downturn. President Obama signed a bill last year that gives the Federal Reserve the power to supervise financial institutions whose failure could cause an economic crisis.

 

Source:

Vivien Lou Chen, Fed’s Kocherlakota Calls for Tax-system Changes to Discourage Debt

Growth, https://www.bloomberg.com/news/2011-06-27/fed-s-kocherlakota-calls-for-tax-systemchanges-to-discourage-debt-growth.html (accessed June 28, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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L.A. Dodgers Baseball Team Files Bankruptcy

The Los Angeles Dodgers have filed for Chapter 11 bankruptcy protection in Delaware. Dodger’s owner Frank McCourt was relying on a TV deal worth billions to help ease financial troubles. However, Major League Baseball did not approve the deal. McCourt is asking for time to secure another media deal, and he is seeking $150 million to finance daily expenses. The Dodgers owe millions to former players, who have filed claims. The team has also experienced a substantial decrease in fan attendance at games.

The Dodgers likely would have been unable to make their next payroll. McCourt filed for bankruptcy before a takeover by MLB could become an option. Analysts believe MLB will fight the bankruptcy, because the league wants the issue to stay within baseball. Additionally, the MLB constitution gives commissioner Bud Selig the power to takeover a team in bankruptcy.

McCourt has been a controversial owner since he acquired the team in 2004. McCourt purchased the Dodgers for $430 million in a highly leveraged transaction. Selig hired Tom Schieffer to monitor the Dodgers in April, because he was worried about the financial situation. The bankruptcy filing has been an embarrassment for the team.

Source:

Associated Press, Los Angeles Dodgers File For Bankruptcy, https://msn.foxsports.com/mlb/story/los-angeles-dodgers-file-for-bankruptcy-frank-mccourt-blames-bud-selig-decision-062711 (accessed June 27, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Increasing Student Loan Debt May Burden Future Generations

Student loan debt is causing financial problems for many young Americans. The amount of student loan debt in the United States is over $900 billion. Student loan debt will continue to be a problem for graduates, because many states are reducing financial support for students and schools are increasing tuition. Borrowers cannot default on student loan debt when filing for bankruptcy.The student loan problem may affect future generations as well. Many borrowers are taking 20 or 30 years to repay their debt. Graduates in debt are not likely to save for retirement or donate to their colleges. Additionally, students could still being paying off their student loan debt when their children are attending college.

Experts do not recommend borrowing more than $25,000 for college, which represents the cap on loans from the federal government. Loans from the government generally have better terms than private loans. Experts also suggest that students should not borrow more than they expect to earn as a starting salary when they graduate.

Source:

Theo Keith, David Earl & Blake Hanson, Student Loan Crisis Threatens Financial Futures, https://www.msnbc.msn.com/id/43584744/ns/business-personal_finance/ (accessed July 5, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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Emergency Homeowners Loan Program Offers Aid To Those Struggling With Mortgage

The federal government is attempting to help turn around the struggling housing market and reduce the number of home foreclosures. The Emergency Homeowners Loan Program will help homeowners who are behind on their mortgage and struggling to make payments. Loans of up to $50,000 will be available to the unemployed. Additionally, the loans do not require repayment if certain conditions are met.

The purpose of this loan program is to provide assistance to people who will only need it short-term. The loans offered will last up to two years, borrowers will not be charged interest, and funds will go to the mortgage lender to cover monthly payments and late fees. The loans will be forgiven at a rate of 20% per year. Therefore, a homeowner who stays in their home for five years and stays current with their mortgage will not have to repay the loan. To qualify for the program, borrowers must be in danger of foreclosure and have experienced a loss of income. The program will cost $1 billion.

Critics of the program say that homeowners will be at risk for incurring additional debt. If borrowers do not stay current with their mortgage or sell the home before the loan is completely forgiven, they will be responsible for the loan. However, supporters of the program do not think the program will help enough people. Approximately 4 to 4.5 million homeowners are in foreclosure or at least 90 days behind on their payments. The Emergency Homeowners Loan Program will only provide assistance to about 30,000 people.

Source:

Annamaria Andriotis, More Money for Struggling Homeowners,

https://www.smartmoney.com/spend/real-estate/more-money-for-struggling-homeowners-1309312646029/ (accessed June 29, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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