Personal Bankruptcy

Thursday, September 10, 2015

Understanding the Chapter 7 Bankruptcy Timeline

I am considering filing for Chapter 7 bankruptcy-- how long will the process take?

For the indebted individual, there are two types of bankruptcy to pursue: Chapter 13 and Chapter 7. Chapter 13 bankruptcy involves a reorganization of debts and assets, as well as a payment plan generally spread out over six years. Chapter 7 on the other hand involves a liquidation of assets in order to absolve and forgive debts.

The Chapter 7 timeline begins with the filing a voluntary petition, at which point the debtor will receive a case number. If there are any mandatory documents missing from the filing, the debtor will have 14 days to amend the petition, a task  with which a bankruptcy attorney can assist.

The next step for the Chapter 7 petitioner is to present tax returns for the most recent tax year. These returns are filed with the trustee assigned to the case, and are not actually filed with the court.

The first major milestone in a Chapter 7 case is the preliminary meeting of the creditors – known as the 341 meeting. This must take place between 21 and 60 days from the date the case is filed. Forty-five days after the 341 meeting, the debtor must file a Financial Management Certification stating that the required financial education course has been completed.

Approximately 60 days after the first meeting with the creditors, the Bankruptcy Court will enter an order discharging individual debts if eligible under the federal rules.

Overall, a debtor considering a chapter 7 proceeding should expect a time commitment of no longer than 3-6 months from the initial filing until the conclusion of the process. From there, the former debtor can begin enjoying financial freedom and experience the relief of having his or her financial portfolio free from the constraints of crushing debt.

If you are considering consumer bankruptcy and would like to discuss your options with a reputable, experienced  attorney, please do not hesitate to contact Brian Lusardi, Esq. at Miami Valley Bankruptcy. Serving clients throughout the Miami Valley, Ohio area, he can be reached at 937-262-4789.

Friday, August 14, 2015

Proposed Law Would Require Creditors to Reflect a $0.00 Balance on Consumers’ Accounts Post-Bankruptcy

If an account is discharged in consumer bankruptcy, how will this be reflected on my credit report? 

Credit repair is one of the hallmark reasons for a consumer to consider the option of bankruptcy. While a Chapter 7 or Chapter 13 bankruptcy will be reported on a consumer credit report for a period of seven years, the consumer stands to gain significant benefits in that overwhelming revolving debts will be forgiven and erased from memory -- right? Well, not always so lawmakers have proposed a potential legislative solution. 

Under current regulations, banks and credit card companies are not necessarily required to report a $0.00 balance on an account discharged in bankruptcy. As a result, consumers’ credit reports continue to show outstanding (unpaid) balances, which unfairly indicate that the consumer has a much more extensive level of debt than is actually the case. 

Fortunately, Ohio’s own United States Senator Sherrod Brown is sponsoring a bill in Congress that would require both banks and debt buyers to report a $0.00 balance on accounts discharged in bankruptcy to the major credit bureaus. Under the proposed Consumer Reporting Fairness Act, debtors could also pursue legal action against a bank or credit card company that fails to report the zero balance in a timely manner. 

The bill has garnered significant support from groups including Americans for Financial Reform, the Center for Responsible Lending and the National Consumer Law Center. A statement by the National Association of Consumer Bankruptcy Attorneys, “estimate[s] that more than a million Americans who have gone through the bankruptcy process and have legally discharged debts find that their debts continue to appear on their credit reports. This practice of flaunting the bankruptcy discharge by some of the largest banks in this country is intolerable.”

Several U.S. banks are under investigation for debt-reporting violations, including JP Morgan Chase, Bank of America and CitiGroup. 

If you are considering consumer bankruptcy, or have questions about the process, please do not hesitate to contact the attorneys at Miami Valley Bankruptcy, serving Beavercreek, Xenia and Jamestown, Ohio, by calling (937)262-4789. 

Thursday, July 30, 2015

UPDATE: Department of Education Issues New Statement on Student Loan Debts

What is the updated ‘undue hardship’ standard as published by the Department of Education in July, 2015?

With student loan debt crippling the nation, it is understandable that thousands of graduates are considering their options in bankruptcy. Historically, student loans were not considered a dischargeable debt in bankruptcy absent a showing of extreme undue hardship, which was considerably difficult to prove. 

However, the Department of Education has opted to extrapolate on its “undue hardship” concept, incorporating judicial holdings and its own interpretive guidelines to help students and bankruptcy attorneys alike better understand the threshold for obtaining relief. If you are struggling with seemingly insurmountable student loan debt, please do not hesitate to contact Miami Valley Bankruptcy to discuss your rights. 

Department to rely on formula

Essentially, the Department of Education has decided to implement a formula to help determine when not to object to an undue hardship request for student loan forgiveness. The Department’s position reads as follows: 

If [the government] determines that requiring repayment would not impose an undue hardship, the holder must then evaluate the cost of undue hardship litigation. If the costs to pursue the matter in bankruptcy court are estimated to exceed one-third of the total amount owed on the loan (including the current principal balance, any unpaid accrued interest, and current, unpaid accrued collection costs), the [government] may accept and/or not oppose an undue hardship claim by the borrower in an adversary proceeding.

Seems simple enough, right? Under the new guidelines, the government will likely not pursue an objection to loan discharge if the costs to litigate the matter would exceed one-third of the total loan balance. However, the statement does not give much detail on how the government plans to calculate its speculative litigation costs, nor does it provide students with an understanding on whether certain bankruptcy claims will involve more complex (i.e., more costly) litigation than others. Likewise, it does not offer guidance as to whether a loan servicer working on behalf of the Department is permitted to outright deny a request for discharge. 

With so many variables still in the air, we continue to recommend working closely with a Miami Valley bankruptcy attorney in order to maximize your chances of avoiding the burden of explosive student loan debt. 

For help with your student loan discharge request, please contact our Jamestown, Beavercreek and Xenia, Ohio bankruptcy attorneys right away: 937-262-4789. 

Monday, July 13, 2015

Debtors Seek Clarification on Whether Late-Filed Tax Returns – and Underlying Tax Liabilities – Are Excepted

Can a debtor discharge old tax debts in Chapter 7 or Chapter 13 consumer bankruptcy?

In December, 2014, the U.S. Court of Appeals for the Tenth Circuit weighed in on an unusual tax situation involving a consumer bankruptcy proceeding and outstanding individual income tax debt. In the case, two individual taxpayers – husband and wife – failed to file a tax return in 2000 and 2001, resulting in an undisputed deficiency notice. In 2006, the IRS began collection proceedings on the debtors – who thereafter filed for bankruptcy under Chapter 13 and, later, Chapter 7. 

The U.S. Bankruptcy Code allows for the discharge of a wide array of consumer debts, including – in certain circumstances – outstanding federal tax liability. However, these discharges are only available where the taxpayer has actually filed a tax return for the tax years implicated in the bankruptcy proceedings, and are excepted if a tax return was never filed. 

Here, the debtors failed to file a tax return in 2000 and 2001, and were thereafter barred in their subsequent bankruptcy proceeding from discharging the tax debt accrued in those years. In their argument, the debtors explained that they actually filed post-assessment appeals with the IRS after the deficiency notices were sent. However, the U.S. District Court held that a post-assessment tax return is not the same as a traditional tax return due on April 15 of each year, and the tax debt was not dischargeable.  

On appeal, the debtors pleaded to the Tenth Circuit that they should not be liable for the 2000 and 2001 tax debts, as a tax return was filed (eventually). However, the Tenth Circuit sided with the IRS and U.S. District Court, holding that a timely tax return must be filed in order to benefit from the dischargeability allowances in the Bankruptcy Code. In other words, a post-assessment filing is simply too little, too late. 

The debtors have since filed an appeal with the U.S. Supreme Court, and it is unclear whether the court will grant a writ of certiorari to review this complex issue at the intersection of bankruptcy and tax law. 

If you are struggling to meet your debt obligations, are considering bankruptcy and would like to speak to a reputable attorney about your situation, contact the knowledgeable legal team of Miami Valley Bankruptcy at 937-262-4789 today. 

Tuesday, June 30, 2015

Supreme Court Enhances Power of Bankruptcy Courts

In the event a bankruptcy matter involves an equitable or legal claim, can the bankruptcy court handle this matter or must the litigant resolve the issue separately? 

In a consumer or business bankruptcy matter, there often exists collateral matters that arise as parties settle with creditors or discharge debts. In 2011, the U.S. Supreme Court considered a bankruptcy action wherein the parties were in dispute over a common law matter, and the Court held that the bankruptcy judge had no actual jurisdiction to make a decision on the issue. While the U.S. Constitution clearly articulates this jurisdiction to the “Article III” Courts (i.e., federal district courts), the requirement to re-litigate collateral claims outside bankruptcy court was proving to be not only inconvenient, but wasteful and time consuming. 

In 2015, the Supreme Court revisited the issue, and arrived at an alternative conclusion in a 6-3 opinion penned by Justice Sonia Sotomayor. The case, described more fully below, stands for the notion that a collateral common law or equitable matter directly related to a bankruptcy filing can be decided by a bankruptcy judge, and U.S. bankruptcy courts should have jurisdiction to hear these issues – provided the issues are incident to the overriding bankruptcy claims. 

Court’s Decision in Wellness International Network, et. al. v. Richard Sharif

The Wellness case involved an individual consumer debtor seeking to have a debt owed to Wellness International discharged. Pursuant to the filing, Wellness International sought a declaratory judgment that Mr. Sharif maintained several trust accounts that should be accessible to creditors and available to help pay off or reduce debts prior to discharge. In the interim, the Supreme Court rendered its decision in the aforementioned 2011 case, and declared that only direct bankruptcy issues are to be decided by bankruptcy courts – and that a declaratory judgment does not fit into that category. 

In a contrasting decision, the Court reconsidered its position and held that parties may mutually agree to litigate non-bankruptcy matters in bankruptcy courts, so long as all parties consent to the decision voluntarily. More specifically, the Court premised its holding on the notion that “[a]djudication based on litigant consent has been a consistent feature of the federal court system since its inception.  Reaffirming that unremarkable fact, we are confident, poses no great threat to anyone’s birthrights, constitutional or otherwise.”

If you are considering consumer bankruptcy and would like to discuss your rights and obligations under current laws, please do not hesitate to contact our Miami Valley bankruptcy attorneys at today by calling (937)262-4789. 

Thursday, May 28, 2015

Medical Debt & Bankruptcy

My husband and I are facing bankruptcy primarily due to our insurmountable medical debt. Will these charges be forgiven? Or will we still owe a portion of the outstanding balances? 

Medical debt is one of the hallmark dischargeable debts in Chapter 7 consumer bankruptcy – and may be totally erased by a successful bankruptcy filing. According to data compiled by the U.S. Census Bureau and the federal bankruptcy courts, medical debt remains the reigning number one cause of bankruptcy in the United States. Fortunately, bankruptcy laws consider medical debt to be a “nonpriority unsecured debt,” meaning it will more than likely disappear at the conclusion of the discharge process – a welcome relief for overburdened debtors, many of whom are dealing with significant health issues as well. 

Understanding the debt hierarchy 

During the bankruptcy process, the trustee assigned to the file will be required to evaluate the petitioner’s assets and pay off as many outstanding debts as possible. Once an asset profile is identified, the trustee will begin with secured debts, which are those attached to underlying collateral (e.g., home, vehicle, boat). Debtors may choose to walk away from these debts, reaffirm the debt, or redeem the debt. From there, the trustee will require payment of high priority unsecured debts, including taxes or child support obligations. These types of debts are generally not dischargeable, and must be paid regardless of the petitioner’s status in bankruptcy. Lastly, unsecured nonpriority debts are those that are dischargeable in the bankruptcy process, provided the debtor is unable to pay the outstanding balance – and, fortunately, this category includes medical debts. 

Dealing with medical debt in bankruptcy 

If a petitioner’s available assets are depleted to pay secured or high priority debts, he or she may be able to discharge medical debt in its entirety. If, however, assets remain to put toward an outstanding balance at a hospital or practitioner’s office, the trustee will ensure the petitioner pays as much as possible toward the balance. After all assets and available cash are depleted, remaining nonpriority unsecured debts will be discharged, allowing the petitioner to move on toward a brighter financial future. 

If you are concerned about medical debt, considering personal bankruptcy and would like to speak with a reputable attorney about your situation, please contact Cox, Keller & Lusardi right away. You can reach our Xenia, Ohio office by calling (937)262-4789 today. 

Wednesday, May 27, 2015

Student Loans & Bankruptcy: What are the Options?

I am drowning in student loan debt. Is this debt dischargeable in bankruptcy? 

Traditionally, student loans were not considered a dischargeable debt under federal bankruptcy laws. However, as national student loan debt has skyrocketed into the trillions of dollars, struggling graduates may be able to escape the burden of four-figure monthly payments by successfully proving severe financial hardship. As well, there are a number of less common avenues through which student loan debt may be discharged, which could be a financial life-saver for those meeting eligibility criteria. 

Three-prong undue hardship test

Under current consumer bankruptcy law, there is a three-part test to determine if a student loan is dischargeable based on undue hardship. First, you must prove that, if forced to repay the loan under its minimum payment terms, you would be unable to maintain a minimum standard of living. While the phrase “minimum standard of living” has not been officially defined in the bankruptcy code, it is generally considered to mean the financial ability to maintain adequate housing and meet daily needs for the borrower and his or her dependents. 

Second, the borrower must show that the inability to maintain a minimum standard of living is not temporary in nature, and is likely to continue throughout the duration of the loan repayment period. Lastly, discharge may be possible if you have made a true good faith effort to repay the loan prior to filing for bankruptcy – which means a period of at least five years. 

Known as the Brunner test, this three-prong analysis looks for poverty, persistence, and good faith – and may be a good option for borrowers who have tried, but are simply unable, to repay that those looming and unrelenting education debts. 

Other options

As a debtor, there may be other options for avoiding student loan repayment, primarily if your alma mater is involved in any kind of investigation for fraud or consumer deceit. In some instances, students have earned relief from part or all of their student loans by successfully highlighting their school’s false promises or exaggerated graduation/employment rates – thereby triggering a consumer protection or breach of contract action. 

If you are struggling with student and consumer debt, please contact Miami Valley bankruptcy attorneys at Cox, Keller & Lusardi right away.  You can reach our office, conveniently located in Xenia, Ohio, by calling (937)262-4789 today. 

Monday, May 25, 2015

Effect of Bankruptcy on Drivers’ License Suspension in Ohio

I recently went through Chapter 7 bankruptcy and my Bureau of Motor Vehicle fees were discharged as a debt. Can I get my license back? 

For Ohio drivers, nothing can be more frustrating than losing your license for failure to pay fines, penalties and fees to the Bureau of Motor Vehicles (BMV). One the one hand, you’d love to get to work to pay back what you owe. On the other, your loss of driving privileges prevents you from getting to work on time – if at all! 

However, for those who have opted to pursue Chapter 7 or Chapter 13 consumer bankruptcy, there may be a remedy to this discouraging situation. For more information about the positive effects of consumer bankruptcy, including regaining balance and control of your life, be sure to contact an experienced Miami Valley bankruptcy law attorney right away. 

Discharging suspension fees following bankruptcy

The BMV may impose a license suspension for any number of reasons, from dropping out of school to committing a DUI. Each category of suspension carries hefty fines and penalties, and this can create an impenetrable hindrance for many Ohio workers. 

However, Section 4510.10 of the Ohio Revised Code affords Ohioans a number of options in repaying their fines, getting back on the road, and resuming employment or education as quickly as possible. Under Section 4510.10(H), a bankruptcy petitioner having successfully commenced the Chapter 13 or Chapter 7 consumer bankruptcy process may regain access to driving privileges by presenting the BMV with a filed and court-stamped Petition or Discharge in Bankruptcy, as well as a copy of the Schedule of Debts indicating the debts that were included in the bankruptcy. Under the law, the BMV is thereafter required to reinstate driving privileges and reissue the petitioner’s driver’s license, provided there are no additional underlying debts or issues that may prevent reinstatement (e.g., outstanding child support). 

Petitioners seeking reinstatement following bankruptcy should direct their paperwork to Ohio Bureau of Motor Vehicles, Attn: Compliance Unit, P.O. Box 16583, Columbus, Ohio 43216-6583, or appear in person at any Reinstatement Center. 

If you are considering bankruptcy or would like to learn more about the process, please contact the law firm of Cox, Keller & Lusardi today by calling (937)262-4789 today. 

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Miami Valley Bankruptcy, Brian Lusardi, Esq., assists clients with Bankruptcy matters including but not limited to: Common Myths, Cost of Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, The New Bankruptcy Law and Personal Bankruptcy in Xenia, Ohio, and the cities of: Wilberforce, Alpha, Spring Valley, Dayton, Bellbrook, Yellow Springs, Cedarville, Fairborn and Clifton; and the counties of Greene and Montgomery.

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