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Duration of Chapter 13

Chapter 13 bankruptcies have a minimum commitment period of three years and a maximum of five years. This means that the repayment plan in a Chapter 13 will last somewhere between three and five years. A number of considerations determine this.

The first consideration is whether a debtor is below or above the median income. The median income is the median income for the household size of the debtor in the state the debtor lives in. If the debtor is below the median income, the debtor can elect a three-year plan. If the debtor is above the median income, then the debtor must have a five-year plan.

If the debtor is below the median income, the debtor may choose to enter a repayment plan that lasts longer than three years. For example, if the debtor is filing a Chapter 13 in order to pay mortgage arrears and stop a foreclosure, then debtor may elect to file a five-year plan. The debtor may choose this to keep the payment in the Chapter 13 more affordable. All mortgage arrears must be paid back in full over the course of the plan. Stretching the plan over 5 years would allow for a lower payment in some circumstances. The debtor could also elect to have the plan duration be any number of months between 36 (three years) or 60 (five years).

 

By Kris Whelchel

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

How Bankruptcy Effects Credit Score

No ifs, ands or buts, your credit score will drop.

How low?

It depends. What does your credit score look like now? If your credit is fairly unblemished prior to filing, you can expect a large drop in your score. However, if your credit is already tarnished and full of negative items, your score may see only a slight drop. A 2010 FICO report showed that an individual starting with a credit score of 780 could drop to 540 and an individual with a 680 score could fall to 530. While these are only examples, they demonstrate that an individual with a higher score to begin with has a farther way to fall, but both individuals land in close proximity (530-540). Until you file, it is impossible to state where you will land. Your credit score may be affected more or less.

How long will the bankruptcy negatively affect your credit score?

A bankruptcy will stay on your credit report for 10 years. BUT, as time passes and positive information supplements your report, the impact becomes less and less debilitating. Further, if you are motivated to rehabilitate your credit, it can be done. Your credit score can be rebuilt in 1 – 3 years.

So how do I move on and rebuild my credit after I file for bankruptcy?

Start by verifying that your credit report is free from errors. The major credit reporting bodies are TransUnion, Equifax, and Experian. Check that your report from each of these institutions is accurate and lists your pre-bankruptcy debts as “included in BK.” From there, be sure to check back on your credit score regularly (every 4 months). Eventually, you will be able to request that the pre-bankruptcy debts be removed from your report altogether.

Next, make an honest assessment of your finances and what led you to file bankruptcy in the first place. If you fail to recognize what went wrong the first time, you will likely fall into the same pattern and end up in the same trouble as before. Once you have recognized these financial faults, weed them out and start taking action to establish positive credit.

Right after filing it will be difficult to borrow money. Why? Because you are considered a greater risk to the lender, often referred to as a subprime borrower. As a result, you will likely be offered higher interest rates and greater penalties for defaulting. On the other hand, some credit card companies may find you to be a better risk and will start sending you offers immediately after you file bankruptcy. This belief that an individual who has just filed is a good risk for credit card companies is rooted in the fact that bankruptcy law forbids individuals to receive a second discharge in a Chapter 7 bankruptcy within eight years of the first filing. Meaning: a debtor cannot rid himself of the responsibility of newly acquired credit card debt for another eight years.

Remember this: THERE IS HOPE. YOUR CREDIT IS NOT LOST FOREVER! It may take some self-assessment and discipline, but it is absolutely possible. It will be more difficult at first, but as was alluded earlier, as time passes the positive elements to your credit will increase and the “bad” will begin to dwindle.

 

 

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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How will Filing Bankruptcy Affect my Credit?

Many people wonder how filing bankruptcy will affect their credit. The truth is that there is not a clear answer to this question. Most people who file bankruptcy are already behind on their bills and often have bad credit as a result. In these circumstances, it is hard to say if filing bankruptcy will make things worse.

The fact that a person has filed bankruptcy can appear on his or her credit report for a period of 10 years after the date the case was filed. However, this doesn’t mean that a person who files for bankruptcy will be unable to obtain credit for 10 years! Because bankruptcy wipes out all of a person’s old debts, he or she may actually be in a better position to pay new lenders after the bankruptcy. As a result, some lenders are willing to extend credit to a person who has filed a bankruptcy soon after the case is discharged. However, the interest rates and fees may be high, so a person who has filed bankruptcy should be careful not to take on debt he or she can’t pay.

After filing bankruptcy, debts discharged in the bankruptcy should be listed as having a zero balance on the filer’s credit report. Debts that are incorrectly reported as having a balance will negatively affect a person’s credit so it is important to check your credit report after filing bankruptcy. Any errors should be reported to the credit reporting 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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Stopping Lawsuits, Garnishments and Bank Levies

When a person doesn’t earn enough money to cover his or her expenses, life can be stressful enough. Unfortunately, this financial stress can become overwhelming when one or more of an individual’s creditors threaten to take legal action to collect money from a debtor.

For example, credit card companies and medical providers often bring civil lawsuits against debtors who do not pay their bills. Once a creditor obtains a judgment against a debtor, the creditor can begin garnishing the debtor’s wages or seizing money the debtor has in his or her bank accounts. This can have serious negative consequences for some debtors, who may not be able to afford to put food on the table or pay their monthly rent if all of the money in their bank account is suddenly seized.

Fortunately, bankruptcy can offer relief for people who are being threatened with lawsuits, garnishments or bank levies by creditors. Once a person files a bankruptcy petition, an automatic stay goes into effect. The automatic stay prohibits creditors from taking any further action to collect debts from the petitioner for the duration of the bankruptcy proceeding. As a result, creditors must immediately stop from garnishing a person’s wages or seizing his or her bank accounts.

In addition to stopping wage garnishments and bank levies, the automatic stay can benefit debtors in many other ways, such as by delaying evictions or utility shut-offs, stopping repossessions and can even be used to prevent a home foreclosure in certain circumstances. If you have questions about whether the automatic stay could help you, contact a local bankruptcy attorney.

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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Twitter, Facebook, and Emailing about your Bankruptcy case

Tweeting, Facebook posting, emailing, and even cybersquatting on website domain names can and will affect the outcomes of a pending bankruptcy case.  As tempting as it is to post negative status updates about your creditors or of a debtor’s balance sheet or personal identification information, a person’s best bet is to let knowledgeable and experienced bankruptcy attorneys handle the matter.  Two recent bankruptcy cases (and probably more to come) clearly have demonstrated that it does not pay to announce to the world your involvement in a pending bankruptcy case or attempt to settle the score through electronic means.

A Fourth Circuit case, In Re Jessica J. Bolin, 22 CBN 12, 2012 WL 4062807 (Bankr. D.S.C. 9/13/12) found that email and Facebook notifications involving information pertinent to a pending bankruptcy case do not bode well.  The website designer debtor listed a business owner that had commissioned the debtor to make a website as a creditor in the designer/debtor’s bankruptcy.  The business owner creditor received notice of the debtor’s bankruptcy filing and answered with harassing and negative emails demanding her money.  Additionally, the jilted business owner/creditor conveniently leveraged the debtor’s social security number and posted nasty remarks on the debtor’s personal and business Facebook page, damaging the debtor’s business further.  The creditor ignored the cease and desist requests trying, as hard as she could, to collect the debt owed to her.  Eventually, the judge found for the debtor, holding that the creditor violated the automatic stay provisions and had committed sanctionable offenses with the Facebook posts and harassing emails.  #gottalovepunitivedamages

In Her Inc., et al., v. Barlow (In re David E. and Maria E. Barlow), 22 CBN 20, 2012 WL 4465503 (Bankr. S.D. Ohio 9/26/12), a Sixth Circuit case, a defendant debtor cybersquatted when he registered five Internet domain names in bad faith to “prove a point”.  The debtor-husband acquired domain names that were similar to the plaintiffs’ names and linked website visitors to the plaintiffs’ commercial competitors and critical and disparaging emails that attacked the plaintiffs’ businesses.  The debtor-husband was found to have cybersquatted- that is- registering or using a domain name identical or confusingly similar to another’s registered trademark or service mark with the bad faith intent of making a profit under the Anticybersquatting Consumer Protection Act.  The plaintiffs were awarded $120,000 in statutory damages, as well as attorney’s fees.  The damages were not dischargeable under Section 523 (a)(6) and the Court noted that such fees “are required only in exceptional cases where there is malicious, fraudulent, willful, or deliberate infringement.” #cybersquattingmeansheftystatutorydamages

So instead of damaging or completely throwing your pending bankruptcy case out to the delight of your adversarial creditor, you should “like” Hoglund Law on Facebook and leave the Internet and social media for their intended uses- funny cat videos and tweeting about that awesome dinner your significant other made for you the other night. #Hoglundlaw=Minnesota’spremierbankruptcyattorneys

Sources: In Re Jessica J. Bolin, 22 CBN 12, 2012 WL 4062807 (Bankr. D.S.C. 9/13/12)

Her Inc., et al., v. Barlow (In re David E. and Maria E. Barlow), 22 CBN 20, 2012 WL 4465503 (Bankr. S.D. Ohio 9/26/12)

Consumer Bankruptcy News Volume 23 Issue 1, October 23, 2012

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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