Tag: bankruptcy

Can I Convert From Chapter 13 to Chapter 7

in Bankruptcy

A very common problem for a lot of people who have filed a Chapter 13 bankruptcy  is the repayment plan that must take place during the case. So much can happen in your financial life during the 36 to 60 months that it takes to complete a Chapter 13 and receive a discharge. You could have a medical emergency, lose a job or experience the loss of a loved one. Life has a way of throwing us little curves that could complicate the repayment plan under a Chapter 13 bankruptcy and make it almost impossible to complete. The question is: Can you convert from a Chapter 13 to a Chapter 7 in this situation?

Fortunately, you are generally allowed to convert from a Chapter 13 to a Chapter 7 at any time. It is probably the most common conversion in bankruptcy. In reality, only about 33% of people filing for Chapter 13 bankruptcy are able to complete the entire three to five years required for a repayment plan in its original format. Usually this is due to some unforeseen circumstances like the ones mentioned above. If your back is up against a financial wall, a conversion may be one of your only options.  

Remember, if you have filed a Chapter 13 bankruptcy, you are allowed to dismiss your case at any time. However, it’s important to remember that once your case is dismissed, the automatic stay is lifted. That means your creditors are once again free to start collection activity or begin foreclosure proceedings.

What Do You Need in order to convert?

Once you’ve decided you want to convert from Chapter 13 to Chapter 7, there are some technical requirements that you must meet. First, you will need to file a Notice of Conversion form with the bankruptcy court. It will also require a $25 fee. Once filed, the conversion usually takes place in just a few days. When all goes smoothly, you won’t lose the protection of your automatic stay.

The one issue that you may run into is the means test that must be passed for the conversion to become final. You may have originally chosen Chapter 13 bankruptcy because your income was too high to qualify for a Chapter 7.Remember,  the income limitations will still remain in effect for a Chapter 7 conversion.

The means test was implemented as a part of the bankruptcy reform act of 2005 as a way to make sure that debtors with high enough incomes ultimately repaid at least some of the money owed to their creditors. If your job or income has changed or you have gotten a divorce or lost a spouse that brought income into the household that pushed your into a Chapter 13 bankruptcy, you will likely be able to pass the means test now. However, if you still make too much money to qualify for a Chapter 7, your conversion will be denied.

What Happens After the Conversion?

Once your petition to convert from Chapter 13 to Chapter 7 is approved by the court, any money you have paid the trustee that has not been divvied out to  your creditors will be returned to you. Your Chapter 13, at this point, is concluded. You will now receive a new Chapter 7 trustee and you will have another 341 hearing with that trustee. Harmon and Gorove will then assist with filing a new statement listing all your assets, liabilities, income and expenses. Going forward, your case will act just like a normal Chapter 7 bankruptcy.

Pros of Converting From a 13 to a 7

  1. You’re done with the Chapter 13 repayment plan.
  2. A normal Chapter 7 is usually completed within 4-6 MONTHS of filing, not 3-5 years.
  3. All unsecured debts are discharged under a Chapter 7.

 

Cons of Converting to a 7 from a 13

  1. Depending on what kind of debt you have, a Chapter 7 may not help if your troubles are from certain types of secured debts.
  2. A Chapter 7 can be on your credit report for up to ten years.
  3. The Chapter 7 trustee may sell certain assets you possess to pay creditors in Chapter 7.

If your Chapter 13 repayment plan is creating an unbearable burden on you, a Chapter 7 bankruptcy may be a better fit for your financial situation. In order to understand the process and your rights under Georgia bankruptcy laws, you’ll need to speak with an experienced Georgia bankruptcy attorney. Remember; you have options!

Adding Debts to your Bankruptcy

in Bankruptcy

Bankruptcy, whether it is a Chapter 7 or Chapter 13 case, is a useful and wonderful tool you can use to dig yourself out of a bad financial situation. The only downside is that it’s pretty much a one shot deal. Think of it as a yard sale for your debt. On that day you have to unload your stuff and you can’t go back and add anything to that garage sale after the fact. That’s a broad idea of how debt in a bankruptcy works. Every penny of debt you have when the bankruptcy is filed can be part of the bankruptcy but adding debts, as a rule, can be difficult. However, there are some rare exceptions.

When can you add debt to a Chapter 7?

When you come in to our office for your bankruptcy consultation, you should bring copies of all your bills. A recent version of your credit report would also be extremely helpful as well. By doing this, you can make sure that all your debts make it into the bankruptcy petition we file with the court. But you may not bring everything or you may have a recent bill that you don’t have a copy of or that isn’t reflected on your credit report.

If you realize after the initial filing that you forgot to tell us about a debt you incurred BEFORE the petition was filed, you can notify your attorney and the petition can be modified to include that debt. Generally speaking, there is a modest fee for the additional paperwork due to the court costs incurred by us to file the updated petition. 

When can you add debt to a Chapter 13?

We can modify your Chapter 13 bankruptcy if you forgot to include a bill or debt in the pile of paperwork you gave your attorney just like we can in a Chapter 7. However, this can be a little more of a hassle if the debt is substantial or if it’s secured because it could trigger a change in your Chapter 13 repayment plan and possibly cause your Chapter 13 payment to go up. If your attorney has to redraft your repayment plan, you’ll likely have to pay an additional fee including more court costs to modify the case.

When can you add debt to a bankruptcy after the initial filing date?

Sometimes you can add debts to your bankruptcy that were incurred after your initial filing date. These situations are as follows:

  • Your Chapter 13 is dismissed and you file another Chapter 13 case. All of the new debt you incurred between the two filings can be included.
  • If you file a Chapter 7 and receive a discharge then file for Chapter 13 protection, you can add any new debts to the Chapter 13.
  • If you file a Chapter 13 and then find yourself unable to make the payments and choose to convert to a Chapter 7, all the debts you racked up between the Chapter 13 filing date and the date of conversion can be added to your new Chapter 7.

 

How to avoid having to modify your bankruptcy case

You generally want to avoid modifications if you can.  Modifying your case can add time and expense that can be avoided if you plan your case the right way.  Planning your case often seems counter intuitive because most people view bankruptcy as an option of last resort and rush into it with the first attorney they find. The better scenario is to schedule a free bankruptcy consultation with a reputable attorney who can help you. They can help you plan the best time to file so that it maximizes the impact the bankruptcy will have on your debts.  You should never try to figure out bankruptcy on your own.  A mistake can be very costly and potentially wipe out any benefit you may actually receive by filing bankruptcy. 

The second thing to consider is preparation. Preparation is imperative to the success of your case.  You will need two years worth of tax returns, 6 months worth of pay stubs, a copy of all your bills, your bank statements and any other statements you have including savings accounts, receipts for childcare, rent or mortgage statements, and any other financial agreements.  Basically anything you would need to prove your financial situation. 

The experienced attorneys at Harmon and Gorove can give you advice based on your individual circumstances. Their decades of experience can help you make sure that your filing is as successful and impactful as is possible. Do yourself a favor and invest in your future. Contact the competent and compassionate attorneys at Harmon and Gorove today for a FREE consultation.  Let us help you get your life and your financial freedom back from greedy creditors.

Is Debt that’s Discharged Really Gone?

in Bankruptcy

Can my old debt come back to haunt me?

Clients ask this constantly.  They’re scared to death that the problems they had before their bankruptcy will come back and that the relief was only temporary.

The short answer is no.

Debt that is wiped out, in your bankruptcy case is gone as a legal liability forever.

The automatic stay that stops all collection activity when your bankruptcy is filed is replaced, once your case is complete, with a discharge injunction.

But then, this is law, so nothing is quite that simple.

Personal liability

The bankruptcy discharge eliminates all personal liability for debts that can be discharged.

If you eliminate your personal liability, your former creditors can’t sue you to recover discharged debts and can’t get a judgment that allows them to place liens on your assets or garnish your wages.

Was the debt discharged

Bankruptcy law prevents some debts from being discharged in bankruptcy. If you want your debt discharged, your debts must be listed in your bankruptcy schedules in order for us to notify your creditors.  We even have to notify the creditors that can’t be discharged.

Debts that can’t be discharged include

  • Child support,
  • Student loans,
  • Recent taxes,
  • Judgments for personal injury caused by drunk driving.

Unfortunately, the discharge order that’s issued by the court once your bankruptcy has concluded doesn’t list the debts that are discharged.  It just says that debts that were dischargeable in bankruptcy are gone.

Is there a lien

The discharge eliminates your personal liability for a debt.  Some creditors have obtained liens that they have attached to certain assets before you file bankruptcy.  If they have perfected that lien it can remain as a charge against those assets.

Perfected liens are an interest in property, a claim to a piece of what you own.

Some liens survive the bankruptcy.  The lien is only a claim on what you owned at the time the bankruptcy was filed.  They can not attach it to assets you acquire after you file bankruptcy.

A lien survives unless you get a bankruptcy order that avoids the lien. Those liens can be eliminated if it impairs an exemption you claimed in the bankruptcy case.

In order to do this you must file a motion to avoid lien in your case.  This means you need to tell your attorney that a creditor might have obtained a judgment from another court and placed a judgment lien before your bankruptcy case was filed.

Do creditors know you got a discharge

Your bankruptcy filing requires that you list all your creditors with good mailing addresses. We do this so they get a notice when your discharge is entered.  Notice to creditors is also about due process because your creditors do have certain rights.

Creditors also get notified so they can participate in the bankruptcy proceedings. It allows them to exercise their rights in the case.

Once your case is discharged, the court mails a copy of the order discharging your debts to everyone on the list of creditors you provide to your attorney at the onset of your case.

If you leave creditors off the list or the debt is sold to someone else, they have no way of knowing that you’ve discharged your debts.  However, notifying creditors isn’t everything. There are rules that pertain to bankruptcy that wipe out debts, even if the creditor isn’t notified.  

So, the rule is:  the debtor’s personal liability for a dischargeable claim is wiped out forever, if the creditor got notice or if there was no payment to any creditors in the case.

If you are drowning in debt, the attorneys at Harmon and Gorove are experts in handling Chapter 7 bankruptcies. We have handled thousands of cases and helped discharge millions of dollars of debt for our clients.  If you feel the need to speak with a qualified bankruptcy attorney contact the attorneys at Harmon and Gorove to schedule a free, no obligation consultation to find out what your rights are under the Bankruptcy code. 

Is Student Loan Debt Dischargable in Bankruptcy

in Bankruptcy

Student loan debt has been labeled a crisis in the United States.  The total outstanding amount of student loans in America currently stands at just over 1.5 Trillion dollars.  That’s more than is owed even to credit card companies. Needless to say, thousands of Americans are struggling with student loan debt each and every day.  They are putting off buying houses, getting married and starting families. The payments and the weight of those payments are keeping people from being entrepreneurial and taking risks. Student Loans are a yoke around the neck of American productivity and frankly, it’s causing our society a lot of trouble.

For people who find themselves unable to pay all their bills, Bankruptcy is a great way to get back on the road to financial prosperity.  Many people often come to our office asking if student loans can be discharged in their bankruptcy, as that alone is a significant contributing factor into why they can’t make ends meet.  Unfortunately, the answer to the question, are my student loans dischargeable, is often no. Student loans are nearly impossible to discharge, especially in this part of the country. In other parts of the country, appeals courts have allowed discharge in certain circumstances that are very limited and still allows only a select few to actually qualify for discharge and then it’s usually only a partial discharge. There are very few times that student loans are dischargeable and only if certain criteria are met.

In order for your loans to be discharged you must prove what the court calls and Undue Hardship.  What actually qualifies as an undue hardship is usually up to the court of appeals that is deciding your case.  In order to qualify for an undue hardship you must pass what is known as the Brunner Test. The test is composed of 3 basic things:

  1. The debtor is unable to maintain a minimum standard of living for themselves and their dependents with their current level of income and expenses.
  2. Their current financial situation appears that it will continue throughout the course of the repayment plan and finally
  3. The debtor has made a good faith effort to repay all the loans that they took out.

IF the court determines that you meet these criteria then they would cancel part or all of your outstanding student loan debt.  I will be very honest. In the decades our office has been operating we have only had 1 client actually have their student loans discharged and that client was going through a terminal disease.  Sadly, it probably isn’t going to happen. There are, however, other options available.

Filing a Chapter 13 or Chapter 7 bankruptcy can allow you to discharge many of your other debts, including medical debts and credit card debts that are taking up valuable disposable income. That income, if freed up, could allow you to get your student loans paid back very quickly and allow you to get that burden off your back for good.

If you are feeling overwhelmed by debt, including student loans, come see the experienced and friendly attorneys at Harmon and Gorove.  They have decades of experience in handling bankruptcy cases of all kinds and they can help you decide which path is best for you during our free, no obligation consultation.  Contact us today to see how we can help you become debt free.

Don’t “Cosign” Your Good Credit Away

in Bankruptcy

So, you’ve gone and done it.  You didn’t listen when we told you not to do it.  You said to yourself, it’s OK, I know my brother won’t skip out on this loan and leave me holding the bag.  Well, you were wrong and he did. Not only that but the truck loan he convinced you to cosign on was just wrecked and your brother also didn’t have insurance.  You’ve got yourself in a mess. Here’s what happens to your credit now.

Your brother was late with his payment or he’s skipped one entirely.  This is a big red flag. It’s also a big red flag to the credit ratings companies.  Your credit score is going to get dinged, probably to the tune of 20-30 points. Honestly, even if your brother doesn’t miss his payments you’re still going to have credit problems.  

One of the thing credit ratings companies look at is something called your Debt to Income Ratio.  This is a measurement of how your income stacks up to your total debt load.  Lets say your monthly income is $10,000 and your monthly payments on all your debts add up to $6,000.  That’s a Debt to Income ratio of 60% and you’re now considered high risk. This loan you’ve cosigned with your Brother is factoring into that DTI of 60% and that’s hurting your credit score and your ability to get new loans at the best interest rates, or at all.  So your credit is taking a hit for your brother and you don’t even get the benefits of having something to show for it.

OK, so back to the issue at hand.  You’ve cosigned and now your on the hook.  Here’s the best ways to avoid massive hits to your credit or the possibility of ending up having to file bankruptcy.  First things first, monitor the borrower to make sure that their payments are on time and in full. This may mean you have to call them every month before the due date to gently remind them that the payment is due and make sure that they actually have the cash to cover that payment.  This is a hassle, and why we told you not to cosign to begin with. This will most likely pay off for you though because it will hopefully keep you from finding out the hard way (like nasty calls from bill collectors) that your brother hasn’t been making his payments and keep him from damaging your credit for years to come.

The next thing you should do is assume that your brother won’t be able to make his payment at some point and that you’ll occasionally have to step in to make the payment in order to keep your good credit score.  After you sign the loan you need to open up a separate savings account and place in that account enough money to cover payments for at least 6 months worth of payments. By doing this, you have a cushion built up in the event that your brother does what the lender thinks they’re going to do, quit paying the loan.  This also protects you in the event that your brother absconds with the truck. It’ll give you enough liquidity to call the lender and try to work out a deal. It’ll still hurt your credit but it hopefully won’t drive you into bankruptcy.

If you were convinced to cosign and now find yourself in financial trouble because of that loan, don’t worry.  We’ve given you a pretty hard time here today but in all honesty, people cosign all the time and it isn’t something that can’t be fixed.  The attorneys at Harmon and Gorove have the ability to make these issues go away using the tools provided in the U.S. Bankruptcy Code. Our attorney have decades of experience in handling cases like this and we are willing and able to help you in your time of need.  Contact us today to schedule your free, no obligation consultation with one of our attorneys.