by Mike Wallace | Dec 22, 2014 | Chapter 7
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville, Tyler and other surrounding communities
I have previously outlined the basics of Chapter 13 bankruptcy filing, so I am going to give an illustration that might help someone understand Chapter 7 bankruptcy.
First, Chapter 7 bankruptcy is means tested, so Debtors have to qualify to file a Chapter 7 bankruptcy based on their income level.
It should be pointed out immediately that Social Security income does not count toward a Debtor’s qualification for Chapter 7 bankruptcy.
The Internal Revenue Service has calculated certain median incomes throughout the United States based on geographical location.
If the Debtor’s median income is below that calculation, then the Debtor is qualified to file a Chapter 7 bankruptcy. If the Debtor’s income exceeds the median income, then additional calculations are made based on a means test that might still allow the Debtor to qualify to file a Chapter 7.
If business debt exceeds all of the Debtor’s personal debt, then there is an automatic qualification so to speak,
Chapter 7 bankruptcy is designed to give a Debtor a fresh start from unsecured debt such as: credit card debt; medical bills; deficiencies related to foreclosures or repossessions; payday loans; signature loans and judgments.
Often, Chapter 7 bankruptcy is referred to as “liquidation bankruptcy,” because to the extent there is property that the Debtor owns that cannot be exempted, then that property is sold by the Trustee appointed to the case and is paid to the unsecured creditors.
For the sake of this discussion and illustration, you should know that the overwhelming majority of cases are referred to as “no asset” cases. In other words, the bankruptcy law allows a Debtor in a Chapter 7 case to use exemptions that are provided for under the law to protect property from liquidation.
For example, a person’s home, vehicle, retirement accounts and personal household goods are generally protected and can be kept by the Debtor.
The advantage to Chapter 7 bankruptcy is that it is a fairly quick process, so the Debtor is allowed an opportunity to get a fresh start without having to make payments as in a Chapter 13 case.
The Debtor receives a “discharge” of all unsecured debt in a Chapter 7 case, which meas they are no longer liable for that debt. The Creditor who holds the debt cannot take any further action to collect the debt once the bankruptcy case is filed.
Certain debts, such as student loan debt, are for the most part non-dischargeable in a Chapter 7 bankruptcy. Contrary to what a lot of people believe, Chapter 7 bankruptcy generally allows a person to rebuild their credit much faster than if they did not file bankruptcy.
To the extent that a Debtor has a mortgage on a home or a loan on a vehicle, then Chapter 7 bankruptcy allows the Debtor to keep the home or vehicle if they so decide. Of course if the payments on such secured debts can no longer be afforded, then the Debtor can surrender the property and receive a discharge of that debt.
All of the above information is for illustration purposes to allow a better understanding of Chapter 7 bankruptcies. Every situation is different and there are special rules that come into play in any given Chapter 7 case. For example, income taxes owed by a Debtor might or might not be dischargeable in a Chapter 7 bankruptcy.
If you have additional questions about Chapter 7 bankruptcy or any other financial situation that you might find yourself in, then give me a call at (903) 683-2018 and we can discuss your situation at no obligation to you.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 10, 2014 | Foreclosure
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville, Tyler and other surrounding communities
A problem that I have seen over the last few years in bankruptcies is a mortgage company dragging their feet in foreclosing on a surrendered property.
It usually plays out by a client contacting me that they are getting notices from the taxing entity for outstanding taxes, notices regarding uncut grass and/or bills from homeowner’s associations advising they owe dues.
The client is shocked when I advise them that they (the client) are responsible for the property until title has been transferred on the property.
Title does not magically transfer to the mortgage company just because the property was surrendered to them in a bankruptcy.
A “Zombie foreclosure” occurs where the mortgage company refuses to move forward for any number of reasons on foreclosing on the property.
If there is no foreclosure, then the title remains in the name of the borrower/homeowner.
The mortgage companies have refused to move forward on foreclosures because of several factors, including a surplus of properties on the market and the costs associated with taking possession of the property may exceed what the lender is willing to incur.
There are possible ways to deal with a zombie foreclosure that might keep a bankrupt client out of a difficult situation, so if you have any questions regarding zombie foreclosures or any other bankruptcy issue then give me a call at (903) 683-2018 or toll free at (800) 867-1583 and we can discuss your situation at no obligation to you.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 10, 2014 | Debt
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville and other surrounding communities
Can I Keep My Credit Card when I File for Bankruptcy?
One of the most frequent questions I get from clients wanting to file for bankruptcy protection is whether they than can keep a credit card out of their bankruptcy.
This question assumes a couple of different possibilities that the client might be facing.
First, they owe a balance on the credit card and they want to keep making the payments on that card, so they can use it in the future.
If the creditor is owed money then this scenario is impossible in a bankruptcy filing because the creditor has to be named in the schedules. Once the creditor receives notice of the bankruptcy filing they will cancel the card.
The second possible scenario is the credit card has a zero balance just prior to the bankruptcy filing.
In this case the creditor is not listed in the schedules as being owed money, so they don’t receive the official bankruptcy notice that goes to all of the creditors.
However, creditors regularly monitor credit databases and other public information to determine if their cardholders have filed for bankruptcy.
In my years of bankruptcy practice I have never seen a situation where the creditor did not learn of the bankruptcy filing and cancel the card.
So, in conclusion, the answer is that you cannot keep a credit card if you file for bankruptcy protection.
However, bank debit cards work just the same as a credit card, with the obvious limitation that you have to have the funds available for the charge in your bank account.
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
by Mike Wallace | Dec 5, 2014 | Bankruptcy
How to Rebuild Your Credit after Bankruptcy
By Mike Wallace, Bankruptcy Attorney, serving clients in all of East Texas, including Lufkin, Nacogdoches, Palestine, Jacksonville and other surrounding communities
I frequently tell clients that have filed for Chapter 13 or Chapter 7 bankruptcy protection that there is life after bankruptcy.
Contrary to the misconception that bankruptcy ruins you for life, I often see clients in better financial condition a short time after receiving a bankruptcy discharge.
I have said it before, there is nothing honorable in dodging your creditors.
It is better to send a message to the creditors through the legal process of bankruptcy that you cannot pay them.
The alternative is to have a credit report filled with charge-offs, repossessions and foreclosures.
There are some suggestions for things you can do to rebuild your credit worthiness after having filed for bankruptcy.
The most obvious is to pay those creditors that you have agreed to pay in the Chapter 13 or have reaffirmed their debt in a Chapter 7.
So, if you have signed a reaffirmation agreement with a creditor on a vehicle in Chapter 7 it is critical that you make your payments in a timely manner.
Other things you can do to rebuild your credit:
- Open a checking and savings account if you don’t already have them established and in good standing. Do your homework and find a bank that has the services you need and does not hit you with outrageous fees and minimum deposit requirements.
- Obtain a secured credit card after you have received your bankruptcy discharge. To obtain a secured credit card you will place a deposit with the credit card company and will use the card like any other major credit card. Maintain a small debt to credit ratio on the card and make sure that you timely make the payments. If you have $250.00 on deposit, then don’t let the balance go higher than $50.00. Don’t pay the huge start-up fees for secured cards and make sure that they report to the three major credit bureaus. One site that you might visit for secured credit card options is CreditCards.com.
- After you have established yourself with a secured card, then apply for a retail or gas credit card. Gas cards are the best idea because gas is a necessity for most people and you won’t be tempted to spend money that you don’t have.
- Also, once you have maintained a secured card in good standing for 12 months, then see if the bank will allow you to convert to an unsecured card. Do not use the secured card or unsecured card for any other purpose other than to rebuild your credit. In other words, pay the balance off at the end of the month. You need to learn to live within your means.
- Monitor your progress if you are trying to rebuild after bankruptcy. Wait at least three months after you have received your discharge and obtain your one annual free report at AnnualCreditReport.com. Dispute any mistakes associated with your report and use Credit.com’s free credit score to monitor your score for free on a monthly basis. I suggest that you make any disputes in writing and mail by certified mail to the bureau. The bureau has thirty (30) days to respond to your complaint.
- Put a budget together and have a place for every dollar. Dave Ramsey has an incredible number of resources available to those who want to properly manage their money. Visit DaveRamsey.com or attend one of Dave Ramsey’s Financial Peace University events being held in your area.
Because God has blessed me with the opportunity to practice law, and more specifically, to practice in an area where I help people in financial distress, I would like to share with you a few scriptures from God’s word that I believe might encourage you (all quotations from the New International Version):
- “I know that the Lord secures justice for the poor and upholds the cause of the needy.” Psalm 140:12
- “I will repay you for the years the locusts have eaten…” Joel 2:25
- “Do not be anxious about anything, but in everything, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.” Philippians 4:6-7
- “Better a poor man whose walk is blameless than a rich man whose ways are perverse.” Proverbs 28:6″
- “But the needy will not always be forgotten, nor the hope of the afflicted ever perish.” Psalm 9:18
As always, any opinions expressed on this website are just that, opinions. So if you have a question regarding bankruptcy or debt relief, then please give me a call to discuss your individual situation. Bankruptcy, as many other areas of the law are very case or fact specific. I pride myself on giving you the answers to your questions that are based on your individual circumstances.
