| Brooks Cotten | 0 Comments | Student Debt

Hardship Discharge of Student Loans

The amount of student loan debt now exceeds outstanding credit card debt in the United States. This is not surprising because acquiring a higher education is perceived to be necessary to landing a job in a competitive environment. Further, it is easier to borrow for a student loan than it is to borrow for other purposes, since unlike other types of loans, neither a job nor a co-signer may be needed. Moreover, the government often guarantees repayment of student loans, and it is not easy to obtain a hardship discharge of student loans in bankruptcy. Read more “Hardship Discharge of Student Loans”

| Brooks Cotten | 0 Comments | Bankruptcy Law

Will I Lose My House If I File Bankruptcy?

In Chapter 7, the Court is not interested in taking and selling property except to the extent that it has equity in it… that is, to the extent that it is worth more than what you owe on it. Thus, the value of your property is very important. You are allowed to protect (“exempt”) equity in your residence up to $21,500.00 per spouse. You may also be able to exempt equity in real estate that you do not live in, but the amount of your allowable exemptions is less in that case. Read more “Will I Lose My House If I File Bankruptcy?”

| Brooks Cotten | 0 Comments | Bankruptcy Law

Starting the Process of Filing for Bankruptcy

General information about bankruptcy is available online, and some people prefer to do preliminary research before making their first contact with a lawyer. However, in bankruptcy, what happens depends on the circumstances of the individual debtor. Also, to some extent, issues are handled differently depending on which judge or which trustee is assigned. Thus, it is not the case that “one size fits all”. Local knowledge and expertise is important to get the best result in your case. Read more “Starting the Process of Filing for Bankruptcy”

| Brooks Cotten | 0 Comments | Bankruptcy Law

Does Filing Bankruptcy Have Any Effect On Obligations Arising in Divorce?

It’s common knowledge that you can’t “bankrupt on child support or alimony”. Obligations “in the nature of support” (even if they are labeled something else in the divorce decree) have never been dischargeable in bankruptcy. This means that you can’t get rid of them without payment. Read more “Does Filing Bankruptcy Have Any Effect On Obligations Arising in Divorce?”

| Brooks Cotten | 0 Comments | Bankruptcy Law

Do I have to include my spouse?

It’s not unusual for your husband or wife to be opposed to filing bankruptcy with you for one reason or another. The good news is that you are not legally REQUIRED to file a joint case with your spouse. Many cases are filed singly, regardless of marital status. However, depending on your circumstances, you might need to file together, because otherwise, you would not qualify for the benefits that you are seeking.

A bankruptcy discharge will only the cover the person who files the case (the “debtor”). If a debt is owed jointly, the non-filing spouse will not be covered by the debtor’s discharge. Where a debtor and the non-filing spouse owe a joint debt and a Chapter 7 is filed, the debtor would be discharged of the debt. However, the non-filing spouse would continue to owe it, and would continue to be subject to collection activity.

In a Chapter 13, the debtor may protect the non-filing spouse on a jointly-owed consumer debt. The debtor does this by providing in the plan that the debtor will pay the debt in full through the plan. While this protects the non-filing co-obligor, it might make the plan more expensive because plan payments have to be high enough to pay the debt. Otherwise, if the debtor will not pay a joint debt, the court will “grant relief from the automatic stay” to allow the creditor to be paid by the non-filing co-obligor.

Suppose you owe a car note jointly with the non-filing spouse, and you intend to pay for that car through your Chapter 13 (whether the spouse files with you or not). You can do this even if you file by yourself. However, in order to fully protect the other party, you would have to pay the full contract interest on the car. This can make a big difference if the contract interest rate is high. By contrast, if you choose to file a joint case, you may reduce the contract interest rate and receive a discharge without paying that high interest.

Suppose your spouse doesn’t owe any debt, or can handle his or her debt without filing with you. In that case, he or she does not have to file. However, you still have to include the spouse’s income and expenses in your budget. (A non-filing spouse’s name and social security number are not included in the bankruptcy petition, even though the Trustee can and does require “proof of income” from the non-filing spouse. This information is not published publicly). Thus, the bankruptcy should not affect the non-filing spouse’s credit so long as debts are not owed jointly.

The budget includes household income and expenses even in a single filing. If you think about it, your ability to pay debt is very much affected by your spouse’s income, because he or she pays some of the bills. In a Chapter 13, your budget must show that you have the ability to pay what your plan requires you to pay. Otherwise, the plan is “infeasible”. Similarly, in a Chapter 7, your budget must show that you can afford to pay for the debts that you want to “reaffirm”, such as your car or your house. Without your spouse’s income, you probably couldn’t afford to do that.

Please call us at 770-683-3303 to discuss your particular situation with our lawyers. 

| Brooks Cotten | 0 Comments | Bankruptcy Law

Garnishments and Frozen Bank Accounts

If a person borrows money and is late in repaying it, the lender may choose to sue to collect the debt. A lender starts a suit by filing a “summons and complaint” in state court. The summons and complaint is “served” (delivered to) the borrower. The method of service should be reflected on the “return of service” noted in the court’s file.

A suit that has been properly served requires that the defendant/borrower file an “answer” within 30 days of having been served with the suit. The answer should state a cognizable reason why the borrower is not legally obligated to pay as alleged by the creditor.

If the borrower files his answer on time, a hearing will be assigned. If he wins the argument at the hearing, a judgment will be entered in his favor. Otherwise, if the borrower fails to answer, or if an answer is inadequate to dispute the default, then the creditor will win. The creditor may then use the judgment as the basis for a “garnishment” or “levy” to collect the money owed to it.

A “garnishment” is a proceeding where the creditor requires the borrower’s employer to pay a percentage of the debtor’s wages into the court until the judgment is satisfied. A garnishment is served on the employer, not on the employee. Thus, it is not necessary for the creditor to “serve” (notify) the borrower of the garnishment, and it may hit the borrower unexpectedly.

Alternatively, a garnishment can also take the form of a “levy”. Here, the creditor may cause the debtor’s bank account to be frozen, and have the bank pay the monies over after a brief waiting period. Again, the borrower does not need to be directly notified, and is often surprised to find that his funds have been frozen. A levy may attach to a joint account even if the other owner(s) of the account have nothing to do with the debt owed to the creditor.

Bankruptcy is commonly used as a defensive action to stop lawsuits, garnishments, and levies. If bankruptcy is filed before a judgment is entered, the bankruptcy will prevent the suit from going forward. If a judgment has been already entered, then at state law, the debt becomes “secured” by a “judicial lien”. In bankruptcy court, a judicial lien may be “avoided” if the lien “impairs exemptions” to which the Debtor would otherwise be entitled. A judgement usually “impairs exemptions” where the Debtor does not own significant equity in property. (This subject is beyond the scope of this article, and would have to be discussed specifically with the lawyer).

If monies have already been taken under a garnishment or levy, it may still be possible to get the money back. Basically, the monies taken must be capable of being “exempted” in the individual case. Further, the amount must still be in the possession of the employer, bank, or court, or alternatively, if the monies have been remitted to the creditor, they must have been garnished within 90 days of the bankruptcy filing, and must exceed $600.00 in amount. These matters are frequently (but not always) resolved in favor of the Debtor. Resolution depends on the facts of the individual case.

Please contact one of our lawyers at 770-683-3303 to discuss how this applies in your particular situation. 

| Brooks Cotten | 0 Comments | Bankruptcy Law

WHAT IS THE “TRUSTEE”?

In the broadest sense, the bankruptcy “Trustee” refers to the Office of the United States Trustee, which is part of the United States Department of Justice. The Trustee comes from the executive branch of the government, which is different from the bankruptcy judge, who is part of the judicial branch of government.

The mission of the Trustee is to promote integrity and efficiency in bankruptcy cases for the benefit of both debtors and creditors. The Trustee’s office oversees the administration of cases, and is a “watchdog” to prevent fraud and abuse.

As a practical matter, the “Trustee” in a particular case is a lawyer who “administers” the bankruptcy estate. In a Chapter 13 reorganization, the Trustee conducts the first court hearing (the “Meeting of Creditors”), and makes recommendations to the bankruptcy judge with regard to the approval (“confirmation”) or rejection (“dismissal”) of Chapter 13 plans. After the plan is accepted, the Trustee monitors the debtor’s performance under the approved plan.

The Chapter 13 Trustee also takes in “plan payments” from debtors each month, and then pays those monies out to creditors. In the Northern District of Georgia, the Chapter 13 Trustee has an office in Atlanta with several lawyers and support staff. The Chapter 13 Trustee takes in millions and millions of dollars from debtors, and then disburses those monies to creditors each month.

In Chapter 7, the “Trustee” plays a different role. In Chapter 7, a local “case Trustee” is assigned to conduct the first court hearing (“Meeting of Creditors”) and to “administer” the estate. A Chapter 7 case is a “liquidation” case. The general purpose of the Trustee is to liquidate (sell) “assets of the estate”. These consist of the debtor’s property as of the date of filing to the extent that the property is worth more than what the debtor is allowed to “exempt” (keep for himself). The Chapter 7 estate does not include the debtor’s wages after the case is filed, though it may include assets inherited within six months of filing, or the recovery of monies from law suits.

As a practical matter, the vast majority of Chapter 7 cases are “no asset” cases. This means that there are no assets for the Trustee to sell, and usually the debts that are owed to a debtor’s creditors are “discharged” without any payment whatsoever. The reason is that “exemptions” permitted to debtors are fairly generous, so that people who don’t own very much property free of liens are usually permitted to keep that property. (If property has a lien on it, it belongs to the creditor to the extent of the lien, and the Trustee has no interest apart from the “equity” in it.)

As explained elsewhere, “exemptions” are allowances permitted under the law in different dollar amounts in different categories of property. One of the jobs of the debtor’s lawyer is to evaluate the property that you own and determine what you can protect (“exempt”). If you are at risk of losing something that you don’t want to lose, sometimes Chapter 13 is the superior choice, or sometimes you may have non-bankruptcy options. The key to making safe decisions is to clearly disclose what property you own to your lawyer in the early stages of consultation.

Please call Newnan Bankruptcy at 770-683-3303 to discuss your particular situation with our lawyers.