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Recent Blog Posts
Bankruptcy Timing for Vehicle Cramdown
Cramdown usually lowers your monthly vehicle loan payment and the total amount you must pay. To qualify the loan must be more than 910 days old.
We’re in the midst of a series on filing your bankruptcy case with the best timing. Today we get into the right timing to be able to cram down your vehicle loan. Cramdown is a potentially huge benefit, so it’s important to know how to take advantage of it. One key consideration in this is the timing of your bankruptcy filing.
Advantages of Vehicle Loan Cramdown
In a Chapter 7 “straight bankruptcy” case, if you have a vehicle loan you must “take it or leave it.” To keep the vehicle, you have to “reaffirm” the vehicle loan. That means you agree to remain fully liable on the debt. It usually means you are stuck with the regular monthly payment, even if you can’t afford it. You can’t change the interest rate, even if it’s high, and jacking up how much you must pay. You are stuck with the full balance on the loan, even if the vehicle is worth much less. This includes late fees and any other contractual charges. If you’re behind almost always you have to quickly catch up. Usually, the only other choice is to “leave” it—surrender the vehicle and discharge (write-off) the vehicle’s debt. If you need and want to keep your vehicle, that’s not an option.
Chapter 13 Timing to Discharge Student Loans
Discharging a student loan requires meeting the difficult condition called undue hardship. Chapter 13 can help through more flexible timing.
We’re in a series on the best timing for filing your bankruptcy case. Two weeks ago we introduced the special condition you have to meet to discharge (write off) student loans: undue hardship. Last week we focused on how to better meet that condition with smart timing of a Chapter 7 “straight bankruptcy” case. Today we get into doing that with a Chapter 13 “adjustment of debts case.
Undue Hardship Requirements
We’re focusing on the phrase “undue hardship” because the law clearly establishes that as a condition for discharging student loans. The U.S. Bankruptcy Code says you can’t discharge a student loan unless paying it “would impose an undue hardship on the debtor [you] and the debtor’s dependents.” Section 523(a)(8). Generally bankruptcy courts have interpreted “undue hardship” to include three requirements. Each has a timing consideration. We’ll look at these three, showing how the timing benefits of Chapter 13 case can help you meet them.
Bankruptcy and Debt Solutions: How Can I Find a Reputable Credit Counselor?
Whether you are planning on filing for bankruptcy or simply need assistance in developing a budget, credit counselors can provide you with the tools and resources you need. Unfortunately, not all credit counselors are created equal. In fact, some can leave you worse off than when you started, which makes finding an experienced, reputable credit counselor absolutely essential for your financial future. The following tips can help you find the one most suited for your needs and preferences and improve your chances of finding the financial empowerment you are looking for.
Know Why You Need a Credit Counselor
Each credit counseling agency and provider has an area in which they are best equipped to help their clients. With this in mind, it is critical that you first know why you need credit counseling. To find the answer, consider your goals and examine your current financial situation. If you are filing for bankruptcy, then you will also want to ensure you find a credit counselor that is approved by the United States Department of Justice since those who are not accredited will not be accepted by the courts.
Chapter 7 Timing to Discharge Student Loans
Discharging a student loan requires showing undue hardship. The timing of your Chapter 7 filing can determine whether you succeed in this.
We’re in a series on the smart timing of your bankruptcy case. Last week we introduced the special condition you must meet to discharge (write off) student loans: “undue hardship.”
Bankruptcy discharges other special forms of debt—such as income taxes—after the passage of a certain amount of time. But student loans are different in that there is no explicit time period laid out in bankruptcy law. Rather “undue hardship,” the condition you must meet to discharge a student loan, often has timing considerations within it. That is, qualifying for “undue hardship” may require timing your bankruptcy case right. You may not be in “undue hardship” at one point but could be earlier or later.
Today we show that can play out under Chapter 7 “straight bankruptcy.”(Next week we’ll do the same under Chapter 13 “adjustment of debts.”)
Bankruptcy Timing to Discharge Student Loans
Discharging—permanently writing off—student loans can be difficult. You may be able to make it easier to do with good bankruptcy timing.
Discharging Student Loans in Bankruptcy
It takes certain circumstances to discharge student loans. Those circumstances can involve the right timing of your bankruptcy case.
Bankruptcy discharges most debts. But it “does not discharge” you from a student loan unless not discharging that debt “would impose an undue hardship.” “[I]mpose an undue hardship” on whom? “[O]n the debtor [you] and the debtor’s dependents.” Section 523(a)(8) of the U.S. Bankruptcy Code.
What does that mean and how is it affected by the timing of your bankruptcy case?
“Impose an Undue Hardship”?
Prevent Fraud Challenges on a Credit Card Debt
Very recent credit card purchases and cash advances can be a problem when filing bankruptcy. Smart timing can mostly solve this problem.
Last week’s blog post introduced the so-called "presumptions of fraud" in bankruptcy. Today we get into dealing with this issue through smart bankruptcy timing.
Bankruptcy Timing to Avoid the Presumption of Fraud
Here’s the key point: you greatly increase the risk that you’ll still have to pay a credit card debt if you file bankruptcy too soon after incurring that debt. You risk still having to pay the purchase(s) and/or cash advance(s) recently incurred. You may still have to pay that part of that credit card debt in spite of bankruptcy.
But you can avoid much of that risk by timing your bankruptcy right. The presumptions of fraud are in effect for only a relatively short period of time after you make the purchase or cash advance. You avoid the presumption of fraud simply by filing bankruptcy after that short period of time has passed.
Common Myths About Bankruptcy in Texas
At our firm, we help clients every day with questions and concerns about the bankruptcy process under the U.S. Bankruptcy Code. Our experience has shown us that bankruptcy proceedings are often misunderstood, and unfortunately, misinformation abounds among those considering filing for bankruptcy. If you are thinking about bankruptcy as an option for your situation, it is very important for you to fully understand the potential advantages and disadvantages, as well as what might happen after the proceedings are complete. With this in mind, here are three of the most common myths about bankruptcy, along with the truth about each one.
Myth # 1: My Employer Will Be Notified That I Filed for Bankruptcy
Financial struggles are embarrassing for many people, and the reasons are understandable. As a result, it might be humiliating for you if your employer were to be notified of your bankruptcy filing. The good news is that this myth—albeit common—is just that: a myth. The bankruptcy process does not involve any employer notification whatsoever unless you happen to owe a formal debt to your employer somehow—in which case your employer would be notified, but as a creditor. Bankruptcy filings are public record, which means they could technically be published by the press, but it is unlikely that your employer would have much interest in searching through such publications.
Does the Automatic Stay During Bankruptcy Apply to Child Support?
When you file for protection under the U.S. Bankruptcy Code, the bankruptcy court will automatically issue a stay that stops all collection activities by creditors. The automatic stay is a court order that prevents creditors from calling you, sending you letters, and otherwise pushing you to pay what you owe them. The stay is meant to be a form of relief that gives you the chance to get organized as you approach your bankruptcy proceedings. If you are subject to a child support order, however, it is important to understand that the automatic stay will not help you with that particular obligation.
How the Automatic Stay Works
Whether you are filing Chapter 7 or Chapter 13 bankruptcy, the bankruptcy code recognizes that you will need time and space to sort out your thoughts and to prepare for the proceedings without creditors bothering you at all hours of the day. The automatic stay is meant to give you that time and space. The stay also serves as the proverbial "line in the sand" as well, meaning that once the stay is issued, collection efforts cannot resume until the bankruptcy proceedings are complete or the creditor obtains the express permission of the bankruptcy court to contact you again. In the meantime, you will not be at risk of foreclosure, eviction, wage garnishments, or even having your utilities shut off.
Which Type of Bankruptcy Is Best for My Financial Situation?
Bankruptcy is often seen as a last-ditch effort to overcome the financial burden that you may be experiencing. While this is typically the case, the level of debt that one may be in can vary greatly depending on their circumstances. Some may have no income and are struggling to pay basic bills, while others may have a steady income but have found themselves buried by exponential medical or credit card expenses. There are two common ways that Texans can file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. By looking at your unique circumstances, you can determine what type of bankruptcy filing is appropriate.
Chapter 7
When imagining what filing for bankruptcy looks like, people often imagine something along the lines of Chapter 7 bankruptcy. Also known as “liquidation bankruptcy”, this form of bankruptcy has the trustee sell the debtor's property and use the money collected to pay off their debts, as close to the total amount as possible - all remaining debts will be forgotten. This form of bankruptcy may seem preferable to some, since the process only takes about six months and some debts may be forgotten, but it is not available to all debtors. If the debtor’s income falls below the state’s median household income, which in Texas is $59,570, he or she is eligible to file for Chapter 7 bankruptcy. The debtor will not lose all of his or her assets during the bankruptcy process, since some personal property can be claimed exempt from the process.
Avoiding Income Tax Interest and Penalties
Bankruptcy timing can affect not only whether you must pay a tax debt but also whether you must pay certain tax interest and penalties.
This blog post is in a series about the importance of smart timing of your bankruptcy filing. Today we cover how good bankruptcy timing can prevent you having to pay certain income tax interest and penalties.
Avoiding Income Tax Interest and Penalties by Discharging the Tax Itself
Two weeks ago we discussed how to time a Chapter 7 “straight bankruptcy” appropriately to discharge an income tax debt. “Discharge” means to legally, permanently write off the tax. Then last week we discussed how to discharge an income tax in a Chapter 13 “adjustment of debts” case. When you discharge a tax in these ways what happens to the interest and penalties tied to that tax?
Generally, if you discharge an income tax debt, that also discharges any interest and penalties associated with that tax. That’s the most straightforward way to avoid such tax interest and penalties.
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