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Bankruptcy

Eliminating Medical Bills with Chapter 7 and Chapter 13 Bankruptcy

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Hospital and medical bills are mostly not under our control. Along with the emotional and physiological stress that comes when you or your loved one is in the hospital, dealing with the added pressure of overwhelming medical fees is not easy. This will why people often seek bankruptcy relief after an outstanding medical debt that might have spiraled out of control.

However, what happens then? Like we all know, life must go on. Can you file for bankruptcy and get out of paying your medical bills?

Medical Debt and Bankruptcy

To file for bankruptcy, debts need to be separated into two categories. These include the priority and nonpriority unsecured debt. When you file for bankruptcy, debts like domestic support obligations and overdue taxes do not get eliminated. In fact, they receive special priority treatment. This means that whenever you are in a position to pay the debt, these will have to paid off first.

Medical bills, however, fall under the category of unsecured debts. Like credit cards, they do not receive any special treatment. This quality results in them having the ability to be wiped out when you file for bankruptcy.

How Does This Happen?

Medical debt can be eliminated with Chapter 7, as well as Chapter 11 bankruptcy. To understand which bankruptcy you should file for, you will have to consider your personal situation and see if you meet the qualification requirements.

Chapter 7 Bankruptcy

If you pass the qualification requirements for Chapter 7 bankruptcy, your medical bills will be wiped out along with other unsecured debts, including student loans. Fortunately, there is no maximum limit to the medical debts that you can discharge under Chapter 7 bankruptcy. Whatever bills that have been paid with your credit card will not be taken into account, along with the rest of your credit card bill.

To qualify for Chapter 7 bankruptcy, you cannot have a high disposable income. Your income needs to be low enough to pass the Chapter 7 Bankruptcy Means Test. This calculates your current income to see if you can pay back a portion of your debt. This test is used to disqualify those with high incomes. If you do not pass the means test, you cannot qualify for the Chapter 7 discharge. However, you may file under the Chapter 13 bankruptcy relief.

Chapter 13 Bankruptcy

In Chapter 13 Bankruptcy, bills are included in your repayment plan, alongside other unsecured debt. Unsecured creditors will have to be paid based on your personal income, expenses, and nonexempt assets.

Each creditor is given a pro-rata portion to make them aware of the amount of money going towards these debts. However, there might be chances that you are not eligible for Chapter 13 bankruptcy. You will be required to make enough income to pay all your bills in full as part of your repayment plan. This also includes priority creditors who need to be paid back as soon as possible. Moreover, medical bills and additional debts must fall under the Chapter 13 debt limits.

For more information, speak with an experienced bankruptcy attorney - schedule your free 1-hour consultation today: https://seanflynnlaw.com/calendar/

A Debtor Dies During Bankruptcy Proceedings: Now What?

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When someone dies, the loss is heavy for family members, friends, and loved ones. Emotions are strong, and everything seems haphazard. However, what’s worse is when, amidst the chaos, there are legal issues to deal with that arrive if a debtor died after declaring Chapter 7 or Chapter 13 bankruptcy.

If you are an heir or successor of your loved one, the chances are that their estate will be passed on to you. However, this only happens if the debt is a joint debt between the deceased and the heir. Once a debtor passes away, creditors will line up to seek the deceased’s assets by selling the estate or getting their hands on anything that will help satisfy the remaining debt. This means that less amount of assets are left for loved ones.

Death and Chapter 7 Bankruptcy

When a debtor passes away during bankruptcy, we assume that the bankruptcy case is automatically closed, and debts are automatically discharged. However, this is not the case. Since the bankruptcy trustee has the responsibility of liquidating assets to pay back creditors, the bankruptcy involved in Chapter 7 bankruptcy does not impact the proceedings.

This means that the process would continue the same way as it would if the debtor was alive. The trustee has to sell off assets to ensure the creditors get paid. However, creditors may still be interested in the debtor’s estate if their debt has not been fully satisfied. This usually comes under bankruptcy discharge, meaning that this bankruptcy wipes out qualifying debt, such as credit card balances, medical bills, and personal loans.

Death and Chapter 13 Bankruptcy

When a debtor is involved in Chapter 13 bankruptcy, his death has more of an impact than if he was involved in Chapter 7 bankruptcy. For someone who partakes in Chapter 13 bankruptcy, his debt is eliminated through a pre-approved repayment plan. If the debtor dies, a trustee or personal representative will overlook the Chapter 13 bankruptcy. A Chapter 13 debtor has to make payments every month to the bankruptcy trustee for a period of three to five years until the repayment plan has been completed. In case he fails to do so, the court will automatically dismiss the case.

In this case, the trustee of the deceased would be presented with the following options:

Dismiss the Case

The most common option is case dismissal. This means that if a debtor passes away during Chapter 13 bankruptcy, the surviving trustees will allow the case to get dismissed so that creditors can take over the deceased’s estate and fulfill their credit.

Request a Hardship Discharge

Before all essential Chapter 13 plan payments have been completed, the court may grant a hardship discharge. In this case, the creditors will receive the same amount as in a Chapter 7 case. The value of the deceased’s property will not be protected with a bankruptcy exemption.

Conversion to Chapter 7 Bankruptcy

Surviving trustees can request the court to convert the case to a Chapter 7 bankruptcy so that they can receive a discharge. While some courts do not allow this, it purely depends on the court and the judge.

Move on with Chapter 13 Bankruptcy

Courts have the authority to proceed and conclude the Chapter 13 bankruptcy, pretending that the debtor has not passed away.

To know more about how Chapter 7 and Chapter 13 bankruptcy can impact individuals, schedule a free 1-hour consultation click here.

Coronavirus and Bankruptcy

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Coronavirus and Bankruptcy

The connection between coronavirus and bankruptcy is not a shock for any of us. The economy has been shakier than ever and there is no way everyone will be able to recover post-pandemic. Hence, it is quite obvious for people to think about going bankrupt as an option as the result of recent changes that the world has been facing.

If you own a business or are a debtor of a personal loan for which you now think that bankruptcy is your best option, we urge you to rethink your decision. There are several reasons why we are saying this, but what you need to keep in mind is that recent bankruptcies of 2020 should not be the cause behind your decision!

Things to Keep in Mind

If you are wondering whether the bankruptcy court is still working and is it still possible to file bankruptcy, then the answer would be yes, the process is still in place. Personal meetings are not happening, but the procedure can take place over a phone call as well.

Now comes the question as to if you should file for it or not. Businesses that have completely gone out of business or those who would have to come up with a new plan from scratch even post-pandemic are the ones that would be considering this option the most. The highlighted names involve restaurants and theatres for which the world has turned upside down. However, there can be other businesses that might have taken a hefty amount of loan before the pandemic and are now not earning good enough to pay their loan back according to the payment plan.

While thinking about all the bankruptcies of 2020, this can be an option for everyone listed above and also for those who might have taken a personal loan for a house, you need to keep in mind that going bankrupt doesn’t necessarily translate to being completely free of your loan. While chapter 7 is considered a straight option out by selling all your assets, chapter 13 which is also called reorganization, and chapter 11 which is the same thing but for business demands you to start a new payment plan through which either the interest or the amount of loan is decreased but you still have to pay some part of your loan in the next 3-5 years. Plus, there is always the stamp that will stay on your credit for the next 10years if you choose to go bankrupt!

What Should I do then?

Our recommendation would be to only opt for this if it is the only thing you can do. The reason why COVID-19 is not just a reason because of which you would want to file for it is because of the relief plan. If you are getting funds from there, you are not obliged to include them in your payment plan which is a benefit for the debtor. Plus, because of the situation, there are certainly different levels at which government and personal investors are allowing ease in the payment process so you can always talk it out.

Lastly, if you still opt for bankruptcy, do keep in mind that you need to first consult an expert and only then start the process. Also, while the dates might be delayed for the hearings, the filing and fee processes should not be delayed!

Colorado Couple Sees $200,000 in Student Loans Forgiven

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Colorado Couple Sees $200,000 in Student Loans Forgiven

It is not often that you see student loans being discharged when a person files for bankruptcy. In fact, it so rarely happens that a lot of people have come to mistakenly believe that it is an unforgivable debt. This, of course, makes the new ruling by the U.S. Court of Appeals for the Tenth Circuit?in favor of a Colorado couple all the more newsworthy. Rejecting the claims made by the student loan giant, Navient, that the couple’s debt was non-dischargeable under bankruptcy law, the court wrote an amount of $200,000 off of their student loans.

“This has been a huge part of my life for so many years now … It affects your whole life. It affects your relationship with your kids, your marriage — everything”, Paige McDaniel (wife) told the news. In another interview, she also told that the loan company had threatened to garnish her wages to recoup the debt before the couple filed for bankruptcy.

The ruling sets a precedent, a loosening of the student loan discharge law that erstwhile have been very rigid its interpretation. It also months after a separate?ruling was made in favor of another student loan borrower, Kevin Rosenberg, who saw more than $200,000 of student loan debt discharged under Chapter 7 bankruptcy.

As of current, there are some 45 million Americans saddled with student loan debts, representing a combined amount of more than $1.6 trillion.

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Chapter 7 Bankruptcy Required Document Checklist ✔

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Chapter 7 Bankruptcy Required Document Checklist ✔

The average Chapter 7 bankruptcy petition is around 50 pages in length, so that means a lot of information is required on your side to complete the forms. Here is a checklist of essential documents usually required in a Chapter 7 Bankruptcy case.

While Filing:

  1. Last 2 years of tax returns
  2. 6 months of paycheck stubs
  3. 6 months of bank statements
  4. Up to date credit report
  5. Driver’s license and Social Security Card
  6. Current investment and retirement statements
  7. Current mortgage and car loan statements
  8. Any valid proof of home and car valuations
  9. Property list with values (this includes personal items)
  10. Valid repair estimates for damaged property
  11. Credit card, collection, and other billing statements
  12. A credit counseling completion certificate

Post-filing:

  1. The count may also require the following documents for verification of information provided in your petition:
  2. 60 days of paycheck stubs or any other proof of income
  3. 60 days of bank statements
  4. Your most recently filed tax return (alternatively, a tax transcript)
  5. A?debtor’s education course completion?certificate

Additional documents:

In addition to the above, you might also be requested to provide further documents by the court trustee as part of their investigation of your filing. Among the most common items include:

  1. Additional paycheck stubs and other financial statements
  2. Profit and loss statements and proof of liability insurance (if you own a business)
  3. Photographs and valuations of rare, antique, or collectible items
  4. Marital settlement agreement or divorce order (if applicable)

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6 Common Bankruptcy Myths Debunked

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Filing for bankruptcy in Texas can be tricky- you might feel scared of the consequences yet may not see yourself with a lot of options. You might have endless questions about the personal insolvency procedure after hearing and reading about lots of bankruptcy-related incidents shared by random people on the internet.

People looking for debt management advice tend to fall into the hole of myths and misconceptions regarding bankruptcy. This can take a serious toll on one’s mental health and be the source of address pressure. To simplify things, we have compiled the six most common bankruptcy myths below:

Filing for Bankruptcy is as Simple as Filing Out Some Forms

The truth couldn’t be more different. While there are loads of benefits of filing for bankruptcy as a last resort for those undergoing severe financial distress, your battle does not end after you fill out the forms. In fact, that is just the start.

Even if you file for basic Chapter 7 bankruptcy, it might lead to a long litigation process. The forms you submit to the federal court need to be as truthful as possible otherwise, there might be severe legal implications. Every element of bankruptcy forms is individually scrutinized by a board of trustees who can object to and revoke your claims at any given moment.

You Can Get Away with Hiding Assets

Don’t do it! It is absolutely essential that you remain honest with your trustee about which assets you personally own.

If you decide not to fully disclose your assets and your trustee comes into contact with some hidden assets, you could get into serious trouble. Your trustee has the authority to suspect your bankruptcy order for an unlimited period. This means that you can sit back and prepare to be patient as there might be no end in sight.

The trustee will then personally handle your finances and lodge a realistic debt management plan. As a consequence of non-disclosure, you might also have to attend a public examination where you and your properties will be heavily scrutinized. If you decide not to show up, an arrest warrant can be issued.

The Whole World Will Find Out

Another common misconception is that everyone, ranging from your close relatives to work colleagues to the person you once met on the street, will find out that you’ve gone bankrupt. This is not true.

Your information will only be filed on the Insolvency Register to help notify your creditors. However, none of the people you know will be aware of your financial status. In fact, your employer might not also find out unless you show him a court-approved Chapter 13 plan that requires you to pay your creditors.

Local newspapers do not publish the names of those who have filed for bankruptcy unless you are Donald Trump or Madonna. To alleviate your worries, seek debt management advice from your trustee.

Declaring Bankruptcy Means Losing All Your Assets

There have been numerous cases where the debtor files for bankruptcy but does not lose a single piece of property, including cars and homes. According to Chapter 7 Bankruptcy, only non-exempt property can be sold while you are allowed to keep everything else.

Once you file for bankruptcy, your property is viewed as the “bankrupt’s estate.” Any property obtained during the personal insolvency period will also be put into that category. Even though the board of trustees will assume control of your assets and freeze your accounts temporarily, this is only to inspect any possible unusual activity.

You will have control over tools of trade such as things needed for your business or employment so that you can continue working and generating an income. However, if you own a high-value car that is deemed unnecessary by the federal court, you might have to downgrade to a mid-price hatchback suitable for work and travel. Essentials needed to run your household such as clothing, furniture, beds, and any home equipment, will also not be taken.

You Will Be Unemployed

The biggest bankruptcy myth! Think about it- why would your trustee or creditors be on board with this decision? By preventing you from working, you will not be able to generate income to repay creditors and follow your debt management plan.

However, there are a few exceptions. Those who have been appointed the seat of directors will be asked to step down. If you wish to hold on to your seat, you will have to ask the court for an exception. Bankruptcy also affects positions in the finance sector, so it is best to make some preparations.

You might also come across some hurdles that make seeking more credit complicated. To address concerns about your career, job, and credit options, it is best to seek insolvency advice before filing for bankruptcy.

You Can No Longer Receive Credit

There’s no denying that filing for bankruptcy will affect your ability to gain credit. If you file for Chapter 7, you can expect it to remain on your credit report for 10 years. This could affect your chances of receiving credit as future lenders will not be as comfortable with lending you money. As a result, you might also have to pay higher interest rates.

However, within one year of filing, you will be able to access credit and gradually rebuild your FICO score. The chances of you facing complications when acquiring a credit card are low. This is because the ability to borrow cash depends on the debt to income ratio. If you have a significant amount of debt, your future lenders might doubt your ability to pay back an additional debt.

Even if you can borrow money after declaring bankruptcy, it is advised not to jump in. Bankruptcy provides a fresh financial start and a chance for you to turn your life around. Hence, try not to overburden yourself with a high-interest debt otherwise, things can get out of control very quickly.

Have More Questions?

If you have any more questions or reservations about filing for bankruptcy, feel free to read up more on the Texas Bankruptcy Law here.

What is an Adversary Proceeding and Its Types?

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During any time within the bankruptcy process, any of the parties involved may choose to file for an adversary proceeding. This article will seek to explain what an adversary proceeding is, how it works, and what are its main types.

What is an Adversary Proceeding?

An adversary proceeding is a type of lawsuit that is separate but related to the bankruptcy case. It may be filed for any complaints related to the bankruptcy for which a court motion cannot suffice. For instance, the debtor may choose to file an adversary proceeding against a creditor in response to the transgression of the former in regard to the automatic stay period. Typically, because it is its own case number, the filer can have a different attorney from the one leading the bankruptcy case.

How It Works

To get started, the interested party first needs to file a complaint with the bankruptcy court and request for their judgment. A summons is then served on the defendant and a copy of the complaint is sent to them as well. They are given a certain number of days to respond to the complaint and file an answer. If they fail to do so, the court will grant a default judgment in favor of the plaintiff.

Main Adversary Proceedings Types

There are numerous reasons under which an adversary proceeding may be filed. Some of its main types are listed below.

Preferential Transfer

The bankruptcy trustee could file a proceeding if it is known that you were insolvent and paid any of your creditors more than $600 within the last 90 days before you filed for bankruptcy.

Bankruptcy Fraud

If you have suspected of engaging in bankruptcy fraud, any of your creditors, the bankruptcy trustee, or the Office of the United States Trustee will file an adversary proceeding against you to deny you your debt discharge. Depending on its severity, you may also incur a number of other harsher penalties. (HYPERLINK: Bankruptcy Fraud – Beware of the Consequences)

Violation of Automatic Stay

A debtor can choose to file an adversary complaint against any creditor that may have violated the automatic stay period in which all debt collection activity is required to be stalled. Depending on the severity of the violation, the creditor may be required to pay the debtor any legal fees involved as well as a sum in damages determined by the court.

Sale of Jointly Owned Property

In a Chapter 7 bankruptcy, if a debtor jointly owns any property with another party, the bankruptcy trustee could file a proceeding to force the sale of the said property in order to pay back your creditors.

Have any question regarding adversary proceeding or in need of legal advice regarding it, please don’t hesitate to get in touch with us through our live chat or by calling 512.640.3340.

What Happens to a Timeshare in a Bankruptcy Case?

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A timeshare is a property in which multiple parties hold ownership. Because of its unique nature as an asset, many may wish to know what happens to a timeshare in a bankruptcy case. This article will aim to provide you with that info as well as other important details related to the topic.

Timeshare and Bankruptcy

Despite a separate real estate category, in bankruptcy courts, timeshares will be treated much the same as, say your personal residential property. If you file for bankruptcy after the foreclosure of your timeshare, the outcome is more straightforward and the same in Chapter 7 and Chapter 13, with you getting a discharge for all your timeshare-related debt.

However, if you still own it at the time of filling, what happens to it largely depends on which bankruptcy chapter you filed under.

Timeshare and Chapter 7

Since most timeshares are unlikely to build on any equity, the bankruptcy trustee cannot sell it off to repay your creditors. Thus, provided you can continue making payments on it, you are allowed to keep it. Meanwhile, if the timeshare does hold ay equity, expect its selling to be virtually guaranteed as most state laws don’t provide any exemptions for it. However, if your state allows for a wildcard exemption, you can avail its benefit to protect your timeshare.

You yourself can also choose to surrender your timeshare during bankruptcy. Under chapter 7, if the timeshare holds no equity, in your bankruptcy discharge any remaining debt balance on it and unpaid maintenance fees assessed before the date of your filing also get eliminated.

However, in most states, you will still be required to pay any fees on the timeshare incurred between the period of your filing and its foreclosure. Because of this, sometimes it might more advantageous to file for bankruptcy after foreclosure to avoid paying such fees. However, it is highly recommended to consult a qualified attorney before doing so to avoid any negative tax implications.

In some cases, surrendering your timeshare that holds equity could also be advantageous. If you hold any priority debt such as unpaid income taxes, your bankruptcy trustee must use the proceeds from selling the timeshare to wipe out that debt before clearing any non-priority ones.

Timeshare and Chapter 13

Under Chapter 13, you are allowed to keep ownership of your timeshare provided you can demonstrate to the court that you have enough disposable income to make payments on it. In case the court deems you to be unable, you are required to surrender your timeshare. Do note that the trustee might not sell the timeshare for you. Instead, you will have to make arrangements for it yourself.

If you have any queries or are in need of assistance regarding the bankruptcy process, please don’t hesitate to give us a call or get in touch through our live chat.

Secured Claims vs. Unsecured Claim – The Difference Explained

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A claim is a term used to describe the outstanding debt a person owes to a specific creditor. In bankruptcy, a creditor must file their claim first in order to receive payment. There are two types of claims that a creditor can file – secured and unsecured. The main difference between the two is that in the former the claim is guaranteed by collateral while the latter has no such guarantee. This blog will educate you on the further differences between the two claims and how their processes work in bankruptcy.

The Claim Process

Within a bankruptcy process, the court may send each of your creditors a deadline (called claim bar) to submit proof of their claim. In addition, in their claim form, they will have to fill out relevant information on their owed debt such as its type, outstanding amount, and whether it is secured or unsecured. Depending on which of the either two is checked by the creditor, the way your owed debt gets discharged may be processed differently.

Secured Claim

Since this type of claim is a debt that was secured by collateral (e.g. home, car, or another type of property), how the creditor is repaid is fairly straightforward. If the said property is non-exempt, the creditor can take ownership of it and attempt to sell it to repay themselves.

However, there are certain types of secured claims in which the said involved debt does not necessarily need to be tied to any collateral. One example is your tax debt, in which the IRS can take the approval of the court to sell your property to secure payment.

Unsecured Claim

Unsecured claims are usually filed on debts that were not tied to any collateral (e.g. your outstanding medical bills, credit card debt, etc.) As such, in a discharge process, the creditors are not allowed to take procession of your property themselves in an attempt to secure debt repayment.

Rather, your non-exempt assets are first taken over by the court trustee who sells them and uses the proceeds to repay the amount to the creditor(s). If you have multiple creditors with an unsecured claim, repayment is done in order of priority. Debts such as child support, money owed to employers, and rent are paid off first. Meanwhile, debts such as those on the credit card or loans from friends and family are paid last.

Get the Help of a Professional Bankruptcy Attorney

Filing for bankruptcy is a very important decision with some serious consequences. Taking the help of a legal expert can go a long way in ensuring that its outcome remains more in your favor. To schedule a free consultation with a bankruptcy attorney, call 512.640.3340, or book one directly online.

6 Revealing Stats about Bankruptcy in America

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There is a terrible misconception that bankruptcies are a result of careless spending or financial irresponsibility. However, having dealt with numerous bankruptcy cases throughout my career, the overwhelming majority tend to stem from people falling into unfortunate circumstances e.g. losing a job, incurring high medical bills as a result of injury or chronic illness, etc. Here are 6 revealing stats about bankruptcy in America.

1. Bankruptcy is on the Decline

The number of bankruptcy cases has been on a steady decline since 2005. Interestingly, the fall has been sharper in the case of business compared to individuals. In 1980, nearly 13 percent of all bankruptcy fillers were businesses. Today, the figure is less than 3 percent. However, as the country enters a recession, the number of bankruptcy cases are likely to surge upwards again.

2. California Leads in Terms of Total Bankruptcy Cases

On average, California tends to have the highest number of total bankruptcy cases. In 2011, at 240,151, the state accounted for 17 percent of all bankruptcies across the country and nearly the same as the number for the next three states combined.

3. Two-Thirds of All Bankruptcies Relate to a Medical Condition

Without argue the biggest reason why Americans file for bankruptcy is due to incurring high medical expenses or due to time out of work. A recent study found that a staggering 66.5% of all bankruptcies were tied to healthcare costs. As healthcare costs have increased over the years while real income had remained largely stagnant, the proportion of bankruptcy cases citing this reason is also increasing.

4. Bankruptcy in Older People is Increasing

Since the 90s, the number of seniors filing for bankruptcy has been on the rise. The percentage of bankruptcy filers aged 55 or above has more than doubled in this period, now accounting for 20% of all cases.

Interestingly, at the same time, bankruptcy among younger individuals (<25) has seen a sharp decline. In 1994, they accounted for 11% of all cases. In 2010, the figure was only 1.33%.

5. Women Are More Likely to File for Bankruptcy

In 2010, women accounted for 52.26% of all bankruptcy filings. However, the proportion has gradually decreased over the years, largely because of more economic opportunities opening up for women and the gender pay gap diminishing.

6. Bankruptcy Filling Among Lower-Income Decreasing

For those earning $30,000 or under, the percentage of total filers decreased from 67.7% in 2006 to 59.53% in 2010. However, for those earning $60,000 or above, the percentage increased from 5.5% to 9.18% in the same period.

Thinking of filing for bankruptcy? The help of a legal lawyer can be crucial for better navigating through the complex process. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.

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