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Recent Blog Posts
What Options Do Homeowners Have to Avoid Foreclosure Due to COVID-19?
For over a year, people throughout the United States have experienced multiple types of financial difficulties. Many families have had to deal with health issues related to COVID-19, resulting in large medical bills and affecting people’s ability to work and earn an income. Others have suffered job losses or decreases in work hours and income due to pandemic-related business closures. These financial problems have caused some families to be unable to cover their ongoing expenses, including mortgage payments. While many homeowners have been protected from foreclosure by a moratorium put in place by the federal government, this moratorium is coming to an end on July 31, 2021. However, federal agencies have implemented new rules and procedures that may help homeowners avoid the loss of their homes.
Lenders Required to Provide Borrowers With Options to Avoid Foreclosure
Am I Eligible for Cramdowns or Lien Stripping in a Chapter 13 Bankruptcy?
Anyone who struggles with significant debts will want to understand the options that may allow them to reduce or eliminate what they owe. Chapter 7 bankruptcy is often the ideal option for those who do not own significant assets since it can be completed quickly and will allow a person’s unsecured debts (such as credit card balances) to be discharged. However, those who have secured debts (such as a mortgage or car loan) or who own significant assets may need to use Chapter 13 bankruptcy. In these cases, debtors may have options for reducing the debts they owe through methods known as “cramdowns” and “lien stripping.”
Addressing Secured and Unsecured Debts in a Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, a person’s unsecured debts will be consolidated into a repayment plan. The debtor will make payments on this plan over a period of three to five years, and once all payments in the plan have been made, the remaining unsecured debts included in the plan will be discharged. Typically, a person will need to make ongoing payments on secured debts along with the payments made during their Chapter 13 repayment plan.
What Assets Are Exempt From Liquidation in a Chapter 7 Bankruptcy?
Debt can be a difficult issue for anyone to deal with. Fortunately, bankruptcy can provide relief for those who find themselves unable to pay the debts they owe while also covering their ongoing expenses. In many cases, Chapter 7 bankruptcy is the preferable option, since it will allow most debts to be eliminated quickly and easily. This form of debt relief is referred to as a “liquidation bankruptcy” since the bankruptcy trustee may seize some of a debtor’s assets and sell them to pay off the debts owed to creditors. However, certain types of assets are exempt from liquidation. By understanding what exemptions apply to them, debtors can determine whether Chapter 7 bankruptcy is their best option or whether they should choose a Chapter 13 bankruptcy instead.
Bankruptcy Exemptions in Texas
Those who live in the state of Texas can take advantage of some of the most generous bankruptcy exemption laws in the United States, and if necessary, they can use the federal bankruptcy exemptions as an alternative. Homeowners can use the homestead exemption for the equity they own in their homes. In Texas, there are no limits on the amount of a homestead exemption that can be claimed, as long as the home is located on a property that falls within certain size limits. For urban homes located in a city or municipality, a lot can be no larger than 10 acres. For rural homes, a homestead may consist of up to 100 acres for a single person or 200 acres for a family. When filing for Chapter 7 bankruptcy, a homeowner may be able to avoid the foreclosure of their home if they make up any missed mortgage payments and will be able to continue making payments after completing the bankruptcy process.
Pandemic Relief Payments Still Excluded from Chapter 13 Calculations
The recent CARES Act deadline for excluding pandemic relief payments from Chapter 13 “current monthly income” was extended to March 27, 2022.
Way back in March 2020, the CARES Act made some helpful temporary changes to consumer bankruptcy law. (See our blog post in April 2020 about this.) Some of these changes would have expired, but in the meantime, Congress passed two other laws which extended the changes. These are still temporary, so it’s important to know the new deadlines. Last week we focused on one change dealing with Chapter 7’s means test. Today we focus on a similar change and new deadline about Chapter 13’s crucial “current monthly income” calculation.
The Crucial Role of Your “Current Monthly Income” in Your Chapter 13 Payment Plan
The Chapter 13 “adjustment of debts” consumer bankruptcy option provides many advantages over Chapter 7 “straight bankruptcy” for many people. Chapter 13 tends to be better for those with tax and child/spousal support debts, vehicle and home mortgage loans, and more than usual or unusual assets. It involves paying into a monthly Chapter 13 plan for the benefit of your creditors. Usually, that plan allows you to prioritize paying your more important creditors over the rest of them.
Means Test Extension beyond the CARES Act
The CARES Act’s March 27, 2021 deadline for excluding pandemic relief payments from the means test was extended by one year to March 27, 2022.
At the beginning of the pandemic, the CARES Act made some helpful temporary changes to consumer bankruptcy law. (See our blog post in March 2020 about this.) Those changes had expiration dates which have now passed. However, in the meantime, Congress passed two other laws which extended the changes. They are still temporary changes. As time passes, these consumer bankruptcy law changes and their new expiration dates continue to be important. Today we focus on one of these changes pertaining to the Chapter 7 means test.
All Pandemic Relief Payments Excluded as Income for the Means Test
The point of this first change is to prevent the pandemic relief payments from disqualifying people from Chapter 7, “straight bankruptcy.” People could receive and spend their payments without jeopardizing their bankruptcy options. Here’s how it works.
Can I File For Bankruptcy Without My Spouse if I Am Married?
One of the biggest concerns that people have when they file for bankruptcy is how it will affect their financial situation. Many people who are married have shared finances with their spouse, making bankruptcy that much more difficult. Many people falsely believe that when they are married, they must file for bankruptcy along with their divorce. However, even if you are married and have joint finances with your spouse, you can still file for bankruptcy individually. It is important to note, though, that filing for bankruptcy without your spouse can have an adverse effect on his or her credit, depending on the situation.
What Happens to Our Property?
In Texas, any property that either spouse acquires during the course of the marriage is considered to be joint property. However, for the purposes of bankruptcy, joint property is only considered to be that which has both you and your spouse’s name on it. For example, if a person files bankruptcy separately from their spouse in Texas, all of the property that they own -- even jointly -- is part of the bankruptcy estate. This means a spouse’s vehicle can also be included in the bankruptcy estate, even if they have financed the vehicle alone.
Affordable Care Act Enrollment Deadline of August 15, 2021
The usual deadline to apply for health care coverage under the Affordable Care Act was Dec. 15, 2020. It’s now been extended to Aug. 15, 2021.
Our last several weeks of blog posts have been about health insurance and medical bills. Two weeks ago, we got into the topic of health insurance and bankruptcy. Last week was a Q&A about medical bankruptcy. Today we provide urgent information about the current extended Special Enrollment Period for getting insurance under the Affordable Care Act.
Two Key Changes
In the last several months, there have been two major developments with the Affordable Care Act (“Obamacare”). First, a Special Enrollment Period allowed people to start health insurance coverage way past the usual December 15, 2020 deadline. Second, the American Rescue Plan Act lowered the cost of monthly premiums under the Affordable Care Act, often significantly.
The Special Enrollment Period
What is the Difference Between Debt Settlement and Bankruptcy?
Being in debt is not uncommon. According to Bankrate, consumer debt across the United States has reached $14.2 trillion, with the average American being nearly $93,000 in total debt. There are many different types of debt, including credit card debt, student loans, car loans, or personal loans. When you are in debt over your head, you have a couple of options when you are seeking assistance. Both debt settlement and bankruptcy can help you get out of debt, but the method through which they do that could not be any more different.
Debt Settlement
Debt settlement is an alternative to bankruptcy that may be right for some people. Debt settlement occurs when you or a representative from a debt settlement company contact your creditor to negotiate a settlement amount that is typically much lower than the original amount you owed. In some cases, you may be able to negotiate the settlement so that you are only left responsible for 50 to 70 percent of what your total debt was. The upside to debt settlement is that it is not a legal process. You do not have to file anything with the court. Furthermore, debt settlement does not have the same long-term effect on your creditworthiness as bankruptcy.
Health Insurance and Bankruptcy
Having health insurance is extremely important. Both Chapter 7 and Chapter 13 bankruptcy can help you get and keep your health insurance.
Last week we discussed the 6 months of free health insurance provided by the recent American Rescue Plan Act. It may apply to you if you lost your job and your health insurance with it. If this applies to you please check out that blog post.
Today’s blog post gets into the broader topic of health insurance and bankruptcy.
There’s lots of evidence “that medical bills are the single largest causal factor in consumer bankruptcy.” Medical Debt as a Cause of Consumer Bankruptcy. Studies have been showing this for many years.
What may be more surprising is that most people who file for bankruptcy have health insurance at the time of filing. According to one study, nearly 70% of personal bankruptcy filers had health insurance. Medical Bankruptcy in the United States, The American Journal of Medicine.
How Does the Process Work When You File for Bankruptcy in Texas?
If you intend on filing for bankruptcy, then you likely already have a decent idea of what a bankruptcy is. For many people, filing for a bankruptcy is a way to get a fresh financial start and change their lives immensely, yet many people do not actually understand what the process entails. The bankruptcy process consists of various steps that must be taken in order to accurately complete the process. Though the majority of the process consists of paperwork and other administrative tasks, it can be daunting to some, which is why hiring a skilled bankruptcy attorney is recommended.
- Attend Pre-Bankruptcy Credit Counseling: Before you even begin your case, you are required to complete pre-bankruptcy credit counseling. This is typically one meeting that lasts for an hour or two with a credit counselor who is approved by the U.S. Department of Justice. This course must be completed within six months prior to your bankruptcy filing and usually involves discussing your financial situation and your options for bankruptcy.
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