If there is one way bankruptcy debtors get into trouble, it is by failing to tell their bankruptcy attorney about all of their income, assets, debts, etc. Your attorney needs to know your entire financial picture in order to advise you as to whether Chapter 7, Chapter, 13, Chapter 11 or no bankruptcy at all is the best option for you. I have been amazed over the years about how many times clients have forgotten to tell me about a bank account or a source of income outside of their regular job. Luckily, those cases were open and I was able to amend their schedules to show these forgotten items.
However, it is not always easy for a bankruptcy attorney to "fix" the situation if his or her client forgets to disclose important information. At my law firm, Halcomb Singler, LLP, I have potential clients fill out a questionnaire which allows me to see all of their assets, debts, income, expenses and additional information that is very useful in giving them bankruptcy advice. I also meet with clients to review this questionnaire in an attempt to make sure that they have not inadvertently left out any information. Often, I am able to find out a few facts that my clients have misunderstood or glossed over in their completion of the questionnaire. However, there is only so much I can do to make sure that I have all the information about each client. I must rely on my clients to give me information. And, there are many circumstances in which if a client failed to tell me about an asset that they would end up losing the asset and there would be little I could do to help.
For example, in Indiana a married couple filing a joint Chapter 7 bankruptcy petition is able to exempt $700.00 on the date of filing a bankruptcy petition. In the event that the clients failed to tell me about a second bank account that they held on the date of the filing that had $2,000.00 in it, those clients would almost certainly have to turn over approximately $1,300.00 to the trustee, and this is assuming that this second bank account was the only money the clients had on the date of the filing of the bankruptcy. Had the clients told me about this bank account I would have advised them of how to spend this money in a beneficial and appropriate manner prior to the filing of the bankruptcy.
Clients often think of their assets in a different way than they are seen under the law. For example, they might refer to a vehicle that is titled in their name but that was given to their sister last year as their sister's car. However, since the car is still titled in the client's name, it must be listed as an asset in the client's bankruptcy schedules.
One of the things I enjoy most about being a bankruptcy attorney is being able to help my clients go through the bankruptcy process as smoothly as possible. The only way that I, or any other bankruptcy attorney can do that is to have all of the information up front. So, if in doubt, tell your bankruptcy attorney! If you live in central Indiana or the Indianapolis area and are considering bankruptcy contact me for a free consultation at my Carmel office! Also, if there is a bankruptcy topic that you would like to see me blog about let me know.....I am always looking for new ideas.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Sunday, February 27, 2011
Wednesday, February 23, 2011
Indiana Bankruptcy Blog-Making the Decision to File Bankruptcy is the Hardest Part
Yesterday gas prices rose about $.35 a gallon in the Indianapolis, Indiana area, with predictions of at least $4.00 per gallon gas this summer. While most people find this jump annoying, for some it is the difference between being able to pay the bills and falling short at the end of the month. As a bankruptcy attorney in Carmel, Indiana, I talk to people in this situation often. These are people who have been grinding it out each month, working hard and something as minor as a gas spike starts the chain reaction that brings them to my office.
Although I titled Indiana Bankruptcy Blog posting, "Making the Decision to file Bankruptcy is the Hardest Part," perhaps a more proper title would have been "Calling a Bankruptcy Attorney for an Appointment is the Hardest Part." I often meet with people who have put off calling a bankruptcy attorney until their paycheck is garnished and they are a few months behind on their house payment. Understandably, most people will do about anything to avoid filing bankruptcy. People want to pay back money they have borrowed or pay for services they have used and the filing of a bankruptcy petition is not something that should be done without careful consideration. In my opinion, the filing of a bankruptcy petition should also not be done without the advice of a bankruptcy attorney, (although there is certainly no requirement that an individual have an attorney to file a bankruptcy petition) but I will leave that subject for another day.
The bottom line is that people are afraid of bankruptcy for a number of reasons. I believe first and foremost they are afraid of the unknown. Certainly, many people believe that if you file for bankruptcy someone from the bankruptcy court comes and takes all of your stuff and hauls it away. People are also embarrassed and afraid of the social stigma that they believe is attached to bankruptcy. While I completely understand these feelings, we are blessed to live in a country where there is no debtor's prison and the bankruptcy code exists for those people who need to hit the reset button financially. While I will make no claim that the decision to file a bankruptcy is an easy one in most cases, I will say that in my experience there is a sense of relief for my clients after they have made the decision because at least now they have a plan of how to deal with the debt and how to get their finances back on track.
And for those in the Indianapolis area, I think it is worth mentioning that Forum Credit Union is offering a low-cost Dave Ramsey Financial Peace University course. Whether or not you decide that you need to file bankruptcy, this course could help you avoid bankruptcy or make sure that you never find yourself in the position to need to file bankruptcy again. I myself have been through this course, and found it very helpful. I should also add that I believe it is not only helpful for those attempting to manage debt, but also for those who are in an excellent financial situation.
As always, if there is a topic you would like to see discussed on the Indiana Bankruptcy Blog or are seeking a bankruptcy attorney in the Indianapolis area, Anderson, Kokomo, Tipton, Lebanon, Fishers, Noblesville or Carmel, Indiana, please feel free to contact me.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Although I titled Indiana Bankruptcy Blog posting, "Making the Decision to file Bankruptcy is the Hardest Part," perhaps a more proper title would have been "Calling a Bankruptcy Attorney for an Appointment is the Hardest Part." I often meet with people who have put off calling a bankruptcy attorney until their paycheck is garnished and they are a few months behind on their house payment. Understandably, most people will do about anything to avoid filing bankruptcy. People want to pay back money they have borrowed or pay for services they have used and the filing of a bankruptcy petition is not something that should be done without careful consideration. In my opinion, the filing of a bankruptcy petition should also not be done without the advice of a bankruptcy attorney, (although there is certainly no requirement that an individual have an attorney to file a bankruptcy petition) but I will leave that subject for another day.
The bottom line is that people are afraid of bankruptcy for a number of reasons. I believe first and foremost they are afraid of the unknown. Certainly, many people believe that if you file for bankruptcy someone from the bankruptcy court comes and takes all of your stuff and hauls it away. People are also embarrassed and afraid of the social stigma that they believe is attached to bankruptcy. While I completely understand these feelings, we are blessed to live in a country where there is no debtor's prison and the bankruptcy code exists for those people who need to hit the reset button financially. While I will make no claim that the decision to file a bankruptcy is an easy one in most cases, I will say that in my experience there is a sense of relief for my clients after they have made the decision because at least now they have a plan of how to deal with the debt and how to get their finances back on track.
And for those in the Indianapolis area, I think it is worth mentioning that Forum Credit Union is offering a low-cost Dave Ramsey Financial Peace University course. Whether or not you decide that you need to file bankruptcy, this course could help you avoid bankruptcy or make sure that you never find yourself in the position to need to file bankruptcy again. I myself have been through this course, and found it very helpful. I should also add that I believe it is not only helpful for those attempting to manage debt, but also for those who are in an excellent financial situation.
As always, if there is a topic you would like to see discussed on the Indiana Bankruptcy Blog or are seeking a bankruptcy attorney in the Indianapolis area, Anderson, Kokomo, Tipton, Lebanon, Fishers, Noblesville or Carmel, Indiana, please feel free to contact me.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Monday, February 21, 2011
Indiana Bankruptcy Blog-Dealing with Collectors
A great majority of the people who come in to see me at Halcomb Singler to discuss bankruptcy are stressed out over how to deal with debt collectors. Many of these people don't know if they should tell the collector that they are considering filing bankruptcy, don't know what to do when the collector tells them that they have to pay x dollars by the end of the week "or else," or how they should handle collection calls generally.
FOR THOSE WHO HAVE DECIDED TO FILE BANKRUPTCY
To those who have decided to file for bankruptcy (and hired a bankruptcy attorney), one common question is whether they should tell the creditor they are filing bankruptcy. The answer to this is when you receive a call from a collector you can tell them you have hired a bankruptcy attorney and that you will be filing for bankruptcy. My clients are often hesitant to tell a collector that they have hired a bankruptcy attorney that they have hired an attorney and are going to file bankruptcy. There is no need to treat bankruptcy like a state secret. Telling the collectors may even help reduce the influx of collection calls you are receiving on a daily basis. If the collector wants to argue with you about this fact just hang up.
There is no requirement that you get on the phone and contact all of your creditors to let them know that you plan on filing bankruptcy. The reasons for this are: 1) your creditors will receive notice of your bankruptcy filing when your petition is actually filed and 2) the intention to file bankruptcy is much different than actually filing bankruptcy. Specifically, the protections set forth in bankruptcy law do not come into effect until the petition is actually filed with the court, which won't happen until you have met with your bankruptcy attorney to review and sign the bankruptcy schedules.
TO THOSE TRYING TO AVOID BANKRUPTCY
In the event that the folks I am meeting with are trying to avoid bankruptcy or do a debt settlement I tell them to try to work out payment arrangements with the collectors. If this is the direction they want to take I remind them not to make promises they can't keep. Collectors have a habit of saying no to that offer of $50.00 a month and demanding $200.00. If you don't have $200.00 per month to pay toward that debt don't agree to it no matter how much the collector protests. There is no point to agreeing to a payment you can't afford because it just creates additional stress in an already stressful situation. Another, point that I cannot emphasize enough is that no collector should be given the ability to electronically debit your bank account. The results of this can be disastrous if the collector debits too often, debits more money than agreed, or debits when not enough money is in the account and creates a pile of overdraft charges to go along with the other unpaid debts.
There is another way to deal with debt collectors, which is to ignore them. Just don't answer the phone if you don't know who is on the other end of the line. If you have decided that you are going to file bankruptcy this is perfectly fine. As stated earlier, your creditors will receive a notice from the bankruptcy court clerk when your petition is filed. This strategy is best for those who are very nervous or scared to take calls from creditors. I typically tell people if all it is going to do is raise their blood pressure to speak to a collector, then don't. This approach is also helpful if the debtor is likely to cave to the collector's pressure and make a payment, give authorization for automatic debit, etc.
The final point I want to make is so important I am going to yell it at you.
IF THERE IS NO MONEY TO PAY DEBT COLLECTORS, THERE IS NO MONEY TO PAY DEBT COLLECTORS.
People I meet with sometimes have a hard time understanding what I mean by this phrase. What I mean is that you need to put the basic needs of yourself and your family before your debt. For example, do not use the grocery or rent money to pay a debt collector because this just means that you will tap into another source of creditor to replace these funds. Stop the bleeding by taking your available funds every months and paying your basic living expenses. Then, take the funds left after the basic living expenses are paid and, if you are trying to avoid bankruptcy, pay to creditors. If you are not able to pay all of your creditors with the money left over, pay some of your creditors. You can only pay who you have the money to pay. Those collectors who are not getting paid will have to wait or have to pursue some other avenue of collection, such as filing a lawsuit against you. If you still don't have money to pay a creditor who has filed a lawsuit against you, you still don't have the money. If the creditor is eventually able to put you in a position that you have no choice but to file bankruptcy even through you were trying to avoid it, such as through a garnishment, you file a bankruptcy. I guess what I am trying to stress is that there is no situation beyond hope. You simply take it day by day and do what you can. Accept the fact that you don't have the money to pay everyone, come up with a plan, and see where the plan takes you.
I hope that your plan is successful and that you won't need my assistance. However, to those in central Indiana who need options to debt/settlement and/or bankruptcy, I offer a free consultation. Contact me for an appointment and my firm will contact you to set up a time.
**This posting has purposefully ignored the Fair Debt Collections Practices Act.....I will try to write about this aspect of collections at some future date.
FOR THOSE WHO HAVE DECIDED TO FILE BANKRUPTCY
To those who have decided to file for bankruptcy (and hired a bankruptcy attorney), one common question is whether they should tell the creditor they are filing bankruptcy. The answer to this is when you receive a call from a collector you can tell them you have hired a bankruptcy attorney and that you will be filing for bankruptcy. My clients are often hesitant to tell a collector that they have hired a bankruptcy attorney that they have hired an attorney and are going to file bankruptcy. There is no need to treat bankruptcy like a state secret. Telling the collectors may even help reduce the influx of collection calls you are receiving on a daily basis. If the collector wants to argue with you about this fact just hang up.
There is no requirement that you get on the phone and contact all of your creditors to let them know that you plan on filing bankruptcy. The reasons for this are: 1) your creditors will receive notice of your bankruptcy filing when your petition is actually filed and 2) the intention to file bankruptcy is much different than actually filing bankruptcy. Specifically, the protections set forth in bankruptcy law do not come into effect until the petition is actually filed with the court, which won't happen until you have met with your bankruptcy attorney to review and sign the bankruptcy schedules.
TO THOSE TRYING TO AVOID BANKRUPTCY
In the event that the folks I am meeting with are trying to avoid bankruptcy or do a debt settlement I tell them to try to work out payment arrangements with the collectors. If this is the direction they want to take I remind them not to make promises they can't keep. Collectors have a habit of saying no to that offer of $50.00 a month and demanding $200.00. If you don't have $200.00 per month to pay toward that debt don't agree to it no matter how much the collector protests. There is no point to agreeing to a payment you can't afford because it just creates additional stress in an already stressful situation. Another, point that I cannot emphasize enough is that no collector should be given the ability to electronically debit your bank account. The results of this can be disastrous if the collector debits too often, debits more money than agreed, or debits when not enough money is in the account and creates a pile of overdraft charges to go along with the other unpaid debts.
There is another way to deal with debt collectors, which is to ignore them. Just don't answer the phone if you don't know who is on the other end of the line. If you have decided that you are going to file bankruptcy this is perfectly fine. As stated earlier, your creditors will receive a notice from the bankruptcy court clerk when your petition is filed. This strategy is best for those who are very nervous or scared to take calls from creditors. I typically tell people if all it is going to do is raise their blood pressure to speak to a collector, then don't. This approach is also helpful if the debtor is likely to cave to the collector's pressure and make a payment, give authorization for automatic debit, etc.
The final point I want to make is so important I am going to yell it at you.
IF THERE IS NO MONEY TO PAY DEBT COLLECTORS, THERE IS NO MONEY TO PAY DEBT COLLECTORS.
People I meet with sometimes have a hard time understanding what I mean by this phrase. What I mean is that you need to put the basic needs of yourself and your family before your debt. For example, do not use the grocery or rent money to pay a debt collector because this just means that you will tap into another source of creditor to replace these funds. Stop the bleeding by taking your available funds every months and paying your basic living expenses. Then, take the funds left after the basic living expenses are paid and, if you are trying to avoid bankruptcy, pay to creditors. If you are not able to pay all of your creditors with the money left over, pay some of your creditors. You can only pay who you have the money to pay. Those collectors who are not getting paid will have to wait or have to pursue some other avenue of collection, such as filing a lawsuit against you. If you still don't have money to pay a creditor who has filed a lawsuit against you, you still don't have the money. If the creditor is eventually able to put you in a position that you have no choice but to file bankruptcy even through you were trying to avoid it, such as through a garnishment, you file a bankruptcy. I guess what I am trying to stress is that there is no situation beyond hope. You simply take it day by day and do what you can. Accept the fact that you don't have the money to pay everyone, come up with a plan, and see where the plan takes you.
I hope that your plan is successful and that you won't need my assistance. However, to those in central Indiana who need options to debt/settlement and/or bankruptcy, I offer a free consultation. Contact me for an appointment and my firm will contact you to set up a time.
**This posting has purposefully ignored the Fair Debt Collections Practices Act.....I will try to write about this aspect of collections at some future date.
Thursday, February 17, 2011
Indiana Bankruptcy Blog-Can Payday Loans be Included in Bankruptcy
A recent trend I have noticed in folks I meet with to discuss bankruptcy in the Indianapolis area is that they have a payday loan. As we all know, payday loans can easily turn into a vicious cycle of taking out a second loan to pay the first loan, third loan to pay the second loan.....and before they know it people just can't keep up. The high fees and interest rates associated with payday loans often push those teetering on the brink of bankruptcy over the hump.
On top of that, there seems to be a major misconception that payday loans are not dischargeable in bankruptcy. I assume that this misinformation comes primarily from payday loan companies that try to convince their clients it is impossible to discharge a payday loan in bankruptcy. This is simply not true. Most payday loans can be discharged in bankruptcy just as any other unsecured debt. So, don't let the payday loan company call you up and scare you into taking money you were going to use to pay for groceries. Yes, the payday loan company could sue you and they would be able to get a judgment for the money owed as well as attorney fees, late fees and more interest. Once they obtained a judgement the next step would be for them to garnish your wages, which I discussed in a previous blog. However, if you file a bankruptcy the garnishment will stop and the payday loan will likely be discharged.
Another tactic I have heard payday loan companies use is that they would turn the client's name over to the prosecutor's office for a bad check if the loan was not paid. It is true that in Hamilton County Indiana there is a bad check department of the prosecutor's office. The prosecutor can (and will) charge a person with check deception under IC 35-43-5-5 in the event that they present a check knowing at the time of presentation that it is a bad check. However, there is an exception to the general rule regarding post-dated checks. Since at the time the loan is taken the debtor writes a post-dated check which is to be cashed on payday the payday loan is an exception to the check deception statute in Indiana.
If there is one thing that I would bet on it is that your payday lender will tell you that you can't include your payday loan in a bankruptcy, you agreed you wouldn't include it in a bankruptcy or that because you received the cash it would be fraud to try to include it in your bankruptcy. I can tell you that I have filed bankruptcy petitions for people in the Southern District of Indiana with payday loans and have never had a payday loan be excepted from discharge. If you are caught in the payday loan cycle and believe you may need the relief that can be provided under the bankruptcy code contact me for a free initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
On top of that, there seems to be a major misconception that payday loans are not dischargeable in bankruptcy. I assume that this misinformation comes primarily from payday loan companies that try to convince their clients it is impossible to discharge a payday loan in bankruptcy. This is simply not true. Most payday loans can be discharged in bankruptcy just as any other unsecured debt. So, don't let the payday loan company call you up and scare you into taking money you were going to use to pay for groceries. Yes, the payday loan company could sue you and they would be able to get a judgment for the money owed as well as attorney fees, late fees and more interest. Once they obtained a judgement the next step would be for them to garnish your wages, which I discussed in a previous blog. However, if you file a bankruptcy the garnishment will stop and the payday loan will likely be discharged.
Another tactic I have heard payday loan companies use is that they would turn the client's name over to the prosecutor's office for a bad check if the loan was not paid. It is true that in Hamilton County Indiana there is a bad check department of the prosecutor's office. The prosecutor can (and will) charge a person with check deception under IC 35-43-5-5 in the event that they present a check knowing at the time of presentation that it is a bad check. However, there is an exception to the general rule regarding post-dated checks. Since at the time the loan is taken the debtor writes a post-dated check which is to be cashed on payday the payday loan is an exception to the check deception statute in Indiana.
If there is one thing that I would bet on it is that your payday lender will tell you that you can't include your payday loan in a bankruptcy, you agreed you wouldn't include it in a bankruptcy or that because you received the cash it would be fraud to try to include it in your bankruptcy. I can tell you that I have filed bankruptcy petitions for people in the Southern District of Indiana with payday loans and have never had a payday loan be excepted from discharge. If you are caught in the payday loan cycle and believe you may need the relief that can be provided under the bankruptcy code contact me for a free initial consultation.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Tuesday, February 15, 2011
Indiana Bankruptcy Blog-Can a collector garnish my wages?
As a bankruptcy attorney helping people file for bankruptcy in the Indianapolis area, you hear a lot of stories about collection calls. In fact, many people show up at my office to find out whether bankruptcy is a solution to their financial problems because a debt collector has threatened to garnish their wages.
Yes. It is true that in Indiana a creditor may garnish your wages....BUT.....the creditor can't just call up your employer and tell them to start withholding funds. Many debt collectors will threaten garnishment when they are in no position to garnish. In order to garnish a debtor's paycheck the creditor must first file a lawsuit. This does not mean a certified letter from the creditor. Filing a lawsuit requires the collector to serve, via sherif or certified mailing, a summons explaining how long you have to respond or a court date at which you need to appear and a complaint. These are legal documents and are not on the letterhead of a collector or the collector's attorney.
Even once the lawsuit has been filed this does not mean that the creditor is entitled to garnish wages. First, the creditor must obtain a judgment. This can be done if you don't answer the complaint or show up at an assigned hearing date or if you do show up and the judge finds against you. Just because the creditor has obtained a judgment against you in a lawsuit does not mean that the creditor can garnish your wages. The creditor must then send interrogatories to your employer to make sure that you are eligible for garnishment. To be eligible for garnishment means that you make enough money to be garnished according to Indiana law. There is a formula by which this is calculated, but in the interest of simplicity, I can tell you that almost everyone makes enough to be garnished.
Once your employer returns the interrogatories to the Court and you are found eligible for garnishment, the Court can issue a Final order in Garnishment. At this point the order will be sent to your employer and your employer will be ordered to start withholding funds to pay for the garnishment. The amount of the garnishment is 25% of your net (take home) pay.
As you can see, the creditors will often try to coerce debtors to pay with false threats. The threat of garnishment without a lawsuit is almost always without merit. As with most things said by collectors, the threat of garnishment should be taken with a grain of salt. And, if you are not certain whether the threat of garnishment is valid, consult a bankruptcy attorney in your area.
In the event that you have had a garnishment order entered against you or your wages are presently being garnished, the filing of a bankruptcy petition will stop a garnishment in most cases. If you live in Indianapolis or the surrounding areas and have questions about whether bankruptcy is a good option for you to stop a garnishment please contact me.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Yes. It is true that in Indiana a creditor may garnish your wages....BUT.....the creditor can't just call up your employer and tell them to start withholding funds. Many debt collectors will threaten garnishment when they are in no position to garnish. In order to garnish a debtor's paycheck the creditor must first file a lawsuit. This does not mean a certified letter from the creditor. Filing a lawsuit requires the collector to serve, via sherif or certified mailing, a summons explaining how long you have to respond or a court date at which you need to appear and a complaint. These are legal documents and are not on the letterhead of a collector or the collector's attorney.
Even once the lawsuit has been filed this does not mean that the creditor is entitled to garnish wages. First, the creditor must obtain a judgment. This can be done if you don't answer the complaint or show up at an assigned hearing date or if you do show up and the judge finds against you. Just because the creditor has obtained a judgment against you in a lawsuit does not mean that the creditor can garnish your wages. The creditor must then send interrogatories to your employer to make sure that you are eligible for garnishment. To be eligible for garnishment means that you make enough money to be garnished according to Indiana law. There is a formula by which this is calculated, but in the interest of simplicity, I can tell you that almost everyone makes enough to be garnished.
Once your employer returns the interrogatories to the Court and you are found eligible for garnishment, the Court can issue a Final order in Garnishment. At this point the order will be sent to your employer and your employer will be ordered to start withholding funds to pay for the garnishment. The amount of the garnishment is 25% of your net (take home) pay.
As you can see, the creditors will often try to coerce debtors to pay with false threats. The threat of garnishment without a lawsuit is almost always without merit. As with most things said by collectors, the threat of garnishment should be taken with a grain of salt. And, if you are not certain whether the threat of garnishment is valid, consult a bankruptcy attorney in your area.
In the event that you have had a garnishment order entered against you or your wages are presently being garnished, the filing of a bankruptcy petition will stop a garnishment in most cases. If you live in Indianapolis or the surrounding areas and have questions about whether bankruptcy is a good option for you to stop a garnishment please contact me.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Monday, February 14, 2011
Indiana Bankruptcy Blog-Will I lose my House if I file a Bankruptcy in Indiana?
Understandably, one of the most common bankruptcy questions I hear is, "Will I lose my house?" The answer, like most answers given by bankruptcy attorneys is, it depends.
This question is asked so often that I wanted to try to address it on Indiana Bankruptcy Blog. However, no two people that I meet with have the same circumstances, so I will do my best to give generalizations about when a person risks losing their house by filing a bankruptcy. As always, this information is not intended to be relied upon and cannot replace the advice of an experienced bankruptcy attorney.
CHAPTER 7
In a Chapter 7 Bankruptcy your home loan is included in the bankruptcy petition and each debtor states in his or her bankruptcy petition whether he or she intends to reaffirm or surrender the home (there are more options, but for the purposes of this blog I want to simplify it). If the debtor was current on their home at the time of filing the bankruptcy the most likely option is that the debtor reaffirms the house. To reaffirm means that even though the debtor could walk away from the home in the bankruptcy and get out from under the debt that he or she has chosen to keep it. By reaffirming, the debtor signs a contract that states that they would like to keep the home, that they can afford to make the payment and that if they fall behind again in the future and the bank forecloses that they are again liable for any deficiency. The Court will typically approve these agreements so long as the house is not very upside down (to be upside down means to owe more on the mortgage than the home is worth) and the debtor's bankruptcy schedules show that the debtors can afford the payment. If the debtor states that he or she wants to surrender the house, it means that he or she walks away from the house, it will typically continue through the foreclosure process, and the debtor is no longer liable for the mortgage debt.
If a debtor is behind on his or her mortgage payments at the time of filing a Chapter 7 Bankruptcy then the lender will likely ask to lift the automatic stay in bankruptcy. Asking to lift the automatic stay is the lender asking the Bankruptcy Court for permission to continue with (or begin) the foreclosure process in state court. The lender needs to ask the Court for permission because the automatic stay is a protection that typically goes into effect when a bankruptcy is filed dictating that creditors are not to attempt to collect from the debtor(s) and stops foreclosure proceedings. The Court will typically grant the lender's motion to lift the automatic stay if the debtor(s) is behind on the mortgage payments. Therefore, if a debtor wants to keep his or her house and is behind on the mortgage it is usually not a good idea to file a Chapter 7 bankruptcy unless the debtor can obtain funds from another source (retirement, family, etc.) to catch up the mortgage. A debtor who is unable to bring the mortgage current is at risk of losing their home in a Chapter 7 bankruptcy.
CHAPTER 13
Chapter 13 Bankruptcy is an invaluable tool for homeowners who are behind on their mortgage, but have income sufficient to pay the mortgage arrearage back over time. A Chapter 13 bankruptcy allows a debtor to make payments over 3 to 5 years to repay their creditors, including their mortgage lender. A few of the benefits of a Chapter 13 with respect to catching up a mortgage are that: 1) the lender can't deny you the repayment plan so long as the repayment plan has been approved by the bankruptcy court, 2) there are no more late fees being incurred on the mortgage in a Chapter 13, and 3) there is no additional interest being charged on the arrearage in a Chapter 13. I have had clients who were a year or more behind on their mortgage bring it current through a Chapter 13 repayment plan.
In any type of Bankruptcy, the goal is to keep the home of those debtors who wish to remain in the home. There is, however, a hard truth that I have had to tell a few clients. This truth is that if you don't have enough income to make a house payment and pay your normal living expenses and you don't anticipate a way to either bring in more money or reduce expenses, a bankruptcy will not help you in the end. The bottom line is that, unless you have a plan to change whatever it was that caused you to get behind on your mortgage payment (and I understand that reason is often outside the control of the debtor) then a bankruptcy will only delay the inevitable. Bankruptcy can buy time and give tools to aid debtors in overcoming debt, but it is not a magic wand to create income. In situations where a house is truly outside the means of the debtor(s) I advise debtors that your home is where you live with you and your family, while a house is only brick or wood. Letting a house go that is putting a financial strain on the debtor can allow more money for family activities, reduce stress and greatly improve the quality of a debtor's life.
If you are behind on your house payments and want to see if Bankruptcy is a tool that you can use to get current please feel free to contact me. I offer a free initial bankruptcy consultation to those in Indiana. To those in Indianapolis, Fishers, Carmel, Noblesville, Westfield, Tipton, Lebanon, Anderson, Kokomo, and anyone else living in the greater Indianapolis area, feel free to give me a call at 317-575-8222.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Friday, February 11, 2011
Indiana Bankruptcy Blog-What property can you keep if you file bankruptcy?
I believe one of the reasons people often procrastinate visiting a qualified bankruptcy attorney is that they are afraid that when a debtor files bankruptcy that they will lose all of their "stuff." While I can certainly appreciate this fear, this is the exception rather than the rule. Due to the number of people that I meet with who believe they will be left after bankruptcy without the clothes on their back I wanted to write this blog posting on Indiana Bankruptcy Exemptions.
It is important to note that exemptions vary from state to state, and this posting refers only to Indiana bankruptcy exemptions. Bankruptcy "exemptions" are the dollar amounts of stuff that you are allowed to keep if you file bankruptcy. These dollar amounts adjust periodically, but as of the date of this writing the below amounts are the Indiana exemptions. This list of exemptions is not exhaustive. I simply want to cover the exemption categories that are commonly used by bankruptcy debtors in Indiana.
-Intangible Exemption: $350.00 for individual debtor or $700.00 for joint debtors
-Tangible Exemption: $9,350.00 for individual debtor or $18,700.00 for joint debtors
-Homestead Exemption: $17,600.00 for individual debtor or $35,200.00 for joint debtors
-IRA/401k: unlimited
-Professionally Prescribed Health Aids for a Debtor or their dependent: unlimited.
-Interest in Earned Income Credit of Income Tax Refund
-Any interest that the debtor has in real estate held as a tenant by the entireties. The exemption under this subdivision does not apply to a debt for which the debtor and the debtor's spouse are jointly liable.
-Funds in Health Savings Accounts, College Savings Plans and Cash Value of Life Insurance may also be exempt. But these exemption rules are more in depth and beyond the scope of this blog.
Now that I have listed these exemptions I feel it is necessary to explain that these exemptions are measured as of the date of the filing of your bankruptcy petition. Therefore, on the date that your individual bankruptcy is filed you are allowed to have $350.00 and if you have more than $350.00 in cash, money in the bank, stocks, bonds, an income tax refund coming to you or money buried in the back yard combined the bankruptcy court can order you to give it to the trustee for payment to your creditors. One common misconception people have is that if they have $1,000.00 in a bank account and have paid their mortgage, but the check they wrote to the mortgage company for $700.00 hasn't cleared yet that they have $300.00. This is wrong. The bankruptcy court does not care whether a check is cleared. If your bank statement for the date that you filed a bankruptcy says you had $1,000.00 on the day that you filed, then you could be asked to turn over $650.00 to the trustee.
The tangible exemption refers to the "stuff" that people own when they file bankruptcy. This is only what you legally own. A common misconception that people have is that they shouldn't file bankruptcy because the car they have is worth $15,000.00 and in an individual bankruptcy this alone would be more than the exemption. While this would be true if the vehicle is owned outright, most of the people I advise have a loan against the vehicle. In this example, if there is currently $10,000.00 due on the loan the person actual owns, or has equity of $5000.00 in the vehicle, which leaves them with $4350.00 worth of exemptions left for their household furnishings, jewelry, clothing, firearms, sporting equipment and all other tangible personal property.
The same calculation of equity applies to the Indiana Homestead exemption. If you own a $200,000.00 home and owe $175,000.00 on the mortgage there is $25,000.00 of equity. If you are an individual debtor this may mean that you have $7,400.00 worth of equity that is not exempt. In this situation, your attorney would likely need to negotiate a payment you could make to the trustee so that you would not lose your house. However, in the current economic conditions I see very few debtors whose current valuation of their home leaves them with equity above and beyond the Indiana Exemptions.
I am always looking for new topics to write about on Indiana Bankruptcy Blog, so if you have an Indiana Bankruptcy question please feel free to post it as a comment. As always, if you are living in Central Indiana and have questions about bankruptcy you should also feel free to contact me to set up an appointment to for a free initial consultation. You can also reach me at 317-575-8222.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
It is important to note that exemptions vary from state to state, and this posting refers only to Indiana bankruptcy exemptions. Bankruptcy "exemptions" are the dollar amounts of stuff that you are allowed to keep if you file bankruptcy. These dollar amounts adjust periodically, but as of the date of this writing the below amounts are the Indiana exemptions. This list of exemptions is not exhaustive. I simply want to cover the exemption categories that are commonly used by bankruptcy debtors in Indiana.
-Intangible Exemption: $350.00 for individual debtor or $700.00 for joint debtors
-Tangible Exemption: $9,350.00 for individual debtor or $18,700.00 for joint debtors
-Homestead Exemption: $17,600.00 for individual debtor or $35,200.00 for joint debtors
-IRA/401k: unlimited
-Professionally Prescribed Health Aids for a Debtor or their dependent: unlimited.
-Interest in Earned Income Credit of Income Tax Refund
-Any interest that the debtor has in real estate held as a tenant by the entireties. The exemption under this subdivision does not apply to a debt for which the debtor and the debtor's spouse are jointly liable.
-Funds in Health Savings Accounts, College Savings Plans and Cash Value of Life Insurance may also be exempt. But these exemption rules are more in depth and beyond the scope of this blog.
Now that I have listed these exemptions I feel it is necessary to explain that these exemptions are measured as of the date of the filing of your bankruptcy petition. Therefore, on the date that your individual bankruptcy is filed you are allowed to have $350.00 and if you have more than $350.00 in cash, money in the bank, stocks, bonds, an income tax refund coming to you or money buried in the back yard combined the bankruptcy court can order you to give it to the trustee for payment to your creditors. One common misconception people have is that if they have $1,000.00 in a bank account and have paid their mortgage, but the check they wrote to the mortgage company for $700.00 hasn't cleared yet that they have $300.00. This is wrong. The bankruptcy court does not care whether a check is cleared. If your bank statement for the date that you filed a bankruptcy says you had $1,000.00 on the day that you filed, then you could be asked to turn over $650.00 to the trustee.
The tangible exemption refers to the "stuff" that people own when they file bankruptcy. This is only what you legally own. A common misconception that people have is that they shouldn't file bankruptcy because the car they have is worth $15,000.00 and in an individual bankruptcy this alone would be more than the exemption. While this would be true if the vehicle is owned outright, most of the people I advise have a loan against the vehicle. In this example, if there is currently $10,000.00 due on the loan the person actual owns, or has equity of $5000.00 in the vehicle, which leaves them with $4350.00 worth of exemptions left for their household furnishings, jewelry, clothing, firearms, sporting equipment and all other tangible personal property.
The same calculation of equity applies to the Indiana Homestead exemption. If you own a $200,000.00 home and owe $175,000.00 on the mortgage there is $25,000.00 of equity. If you are an individual debtor this may mean that you have $7,400.00 worth of equity that is not exempt. In this situation, your attorney would likely need to negotiate a payment you could make to the trustee so that you would not lose your house. However, in the current economic conditions I see very few debtors whose current valuation of their home leaves them with equity above and beyond the Indiana Exemptions.
I am always looking for new topics to write about on Indiana Bankruptcy Blog, so if you have an Indiana Bankruptcy question please feel free to post it as a comment. As always, if you are living in Central Indiana and have questions about bankruptcy you should also feel free to contact me to set up an appointment to for a free initial consultation. You can also reach me at 317-575-8222.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Tuesday, February 8, 2011
Indiana Bankruptcy Blog-How to Choose A Bankruptcy Lawyer
Choosing a bankruptcy lawyer is no easy process. Most folks don't want to ask around to friends or co-workers for a referral to a bankruptcy lawyer the way that they might for a dentist. My experience has taught me that most folks are up at night on google trying to figure out what might happen in a bankruptcy, whether they even need to file a bankruptcy, and where a bankruptcy attorney is located in their area. In this economy, there are quite a few bankruptcy lawyers, so it can be difficult to pick one out of the numerous listings on Google.
Most bankruptcy attorneys offer a free consultation where you meet with them at their office. Some attorneys will have you watch a video that goes over general bankruptcy information, others will have you meet with a paralegal and some will meet with you personally. Some law firms (I call them bankruptcy mills) do nothing but bankruptcy and operate on a volume basis. What I mean by this, is that they have to file a certain number of bankruptcy petitions for clients each month in order to keep their prices down. In general, these firms offer less client attention from attorneys. If you hire one of these firms you might meet the attorney who will represent you at your 341 bankruptcy hearing 5 minutes before your hearing. The upside is that these firms can typically charge a bit less for a bankruptcy than a firm who assigns one attorney to a bankruptcy case who is available during the pendency of the case for questions and will attend your bankruptcy hearing.
I am not saying that there is anything wrong with a bankruptcy mill. Each person who needs to file a bankruptcy has a different threshold for the process. What I mean is that some people are quite happy to be left alone by a law firm, meet with the attorney 5 minutes before the hearing and never make a telephone call to the attorney's office. Other people who have a lower threshold for the stress brought on by the bankruptcy process, want to establish a relationship with their bankruptcy attorney and want to be able to send an e-mail or make a telephone call to the law firm and get a response from an attorney. It is all just a matter of what each individual's comfort level with the bankruptcy system.
I would characterize my process at Halcomb Singler as the opposite of a bankruptcy mill. I prefer to meet with each of my potential clients individually so that I am able to have a conversation with them about their specific situation and concerns. I believe this is important because there are many layers to the stories that potential bankruptcy clients tell me. With the layers come multiple options including whether they would qualify for a Chapter 7 or Chapter 13 bankruptcy, and whether each of those bankruptcy chapters will solve the problem(s) they are experiencing currently. It is my feeling that I need to meet with these individuals so that they are able to ask me the questions they have been up at night trying to figure out from Google.
In my opinion the most important criteria in selecting a bankruptcy attorney should be that you feel comfortable with him or her and that you trust the attorney's opinion. If, after that first meeting you feel leery that the attorney doesn't know what he or she is talking about, feel, like he or she doesn't care to answer your questions or just in general have a bad feeling about that bankruptcy attorney don't hire them. You should, above all else, feel comfortable and confident that you are in good hands before considering traveling down the road to bankruptcy.
If you would like to meet regarding problems with debt and your options please contact me, Erika Singler, for a free consultation. I will meet with you myself and answer your questions.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Most bankruptcy attorneys offer a free consultation where you meet with them at their office. Some attorneys will have you watch a video that goes over general bankruptcy information, others will have you meet with a paralegal and some will meet with you personally. Some law firms (I call them bankruptcy mills) do nothing but bankruptcy and operate on a volume basis. What I mean by this, is that they have to file a certain number of bankruptcy petitions for clients each month in order to keep their prices down. In general, these firms offer less client attention from attorneys. If you hire one of these firms you might meet the attorney who will represent you at your 341 bankruptcy hearing 5 minutes before your hearing. The upside is that these firms can typically charge a bit less for a bankruptcy than a firm who assigns one attorney to a bankruptcy case who is available during the pendency of the case for questions and will attend your bankruptcy hearing.
I am not saying that there is anything wrong with a bankruptcy mill. Each person who needs to file a bankruptcy has a different threshold for the process. What I mean is that some people are quite happy to be left alone by a law firm, meet with the attorney 5 minutes before the hearing and never make a telephone call to the attorney's office. Other people who have a lower threshold for the stress brought on by the bankruptcy process, want to establish a relationship with their bankruptcy attorney and want to be able to send an e-mail or make a telephone call to the law firm and get a response from an attorney. It is all just a matter of what each individual's comfort level with the bankruptcy system.
I would characterize my process at Halcomb Singler as the opposite of a bankruptcy mill. I prefer to meet with each of my potential clients individually so that I am able to have a conversation with them about their specific situation and concerns. I believe this is important because there are many layers to the stories that potential bankruptcy clients tell me. With the layers come multiple options including whether they would qualify for a Chapter 7 or Chapter 13 bankruptcy, and whether each of those bankruptcy chapters will solve the problem(s) they are experiencing currently. It is my feeling that I need to meet with these individuals so that they are able to ask me the questions they have been up at night trying to figure out from Google.
In my opinion the most important criteria in selecting a bankruptcy attorney should be that you feel comfortable with him or her and that you trust the attorney's opinion. If, after that first meeting you feel leery that the attorney doesn't know what he or she is talking about, feel, like he or she doesn't care to answer your questions or just in general have a bad feeling about that bankruptcy attorney don't hire them. You should, above all else, feel comfortable and confident that you are in good hands before considering traveling down the road to bankruptcy.
If you would like to meet regarding problems with debt and your options please contact me, Erika Singler, for a free consultation. I will meet with you myself and answer your questions.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Monday, February 7, 2011
What happens to your income tax refund if you file bankruptcy?
This time of year, a common question heard by bankruptcy attorneys is whether people who have filed bankruptcy or are planning on filing bankruptcy will be able to keep their income tax refund. Since I am a bankruptcy attorney practicing in the Southern District of Indiana, Indianapolis Division, I will only address how income tax refunds are treated in the Southern District of Indiana. As always, this information is no substitute for the advice of a qualified bankruptcy attorney, but I will do my best to address this question for the readers of Indiana Bankruptcy Blog.
So the answer is.....it depends where you are at in the bankruptcy process, whether any of your income tax refund is attributable to the earned income credit and whether you have filed a Chapter 7 or Chapter 13 Bankruptcy Petition.
Prior to filing of Chapter 7 Bankruptcy Petition
If you have not yet filed your Chapter 7 bankruptcy petition, you are not yet subject to a claim from the bankruptcy trustee. In the event you are entitled to an income tax refund, it is typically best to wait for your income tax refund to come in prior to the filing of your bankruptcy petition. That being said, in Indiana the exemption for cash, whether it be in the bank, in cash or under the mattress is $350.00 for an individual or $700.00 for joint bankruptcy filers. This means that if you receive a $2,000.00 income tax refund and then file bankruptcy prior to spending this money that the trustee could claim all but your $350.00 or $700.00 exemption. I have found that most folks preparing to file for bankruptcy have many things they could do with that money that they have been putting off for a long time. For example, I have had clients obtain car repairs, buy a new mattress, buy some new work clothes, pay for prescription drugs, or catch up their car or mortgage payments with this money. It is permissible to spend the money on living expenses prior to filing bankruptcy. Some people also spend their income tax refunds on bankruptcy attorney fees, which are typically a flat fee. Since there is a fine line between what may and may not be deemed a permissible expense to a bankruptcy trustee, I typically ask clients to let me know what they would like to spend their income tax refund on so that I can let them know whether or not I believe it is a good idea. Examples of things that I have advised clients not to spend income tax refunds on include a vacation, a big screen television, or paying off debts that will be discharged in their bankruptcy.
After the filing of your Chapter 7 Bankruptcy Petition
If you have filed your bankruptcy petition prior to the receipt of your income tax refund the trustee may have a claim to at least a portion of your income tax refund. How much of a claim the trustee has to your income tax refund depends on when your bankruptcy petition was filed. The trustee's claim to your income tax refund is pro-rated through the tax year of the bankruptcy filing. For example, if you filed a bankruptcy on June 30, 2010, which is half way through the year, the trustee could claim 50% of your 2010 income tax refund received in 2011. If your bankruptcy petition was filed in January, 2011, prior to the receipt of your income tax refund, the trustee may claim 100% of the 2010 refund because you filed your case after the year had ended.
Earned Income Credit Exception
It should also be noted that if a portion of your income tax refund is attributable to the earned income credit that the trustee cannot claim that portion of your refund. Many people also believe that the child tax credit is exempt from the trustee's claim, but this is not correct. The only portion of your income tax refund not subject to the bankruptcy trustee's claim is the earned income credit.
Chapter 13 and your Income Tax Refund
Whether or not your income tax refund needs to be turned over to the Chapter 13 bankruptcy trustee depends on your Chapter 13 repayment plan. There are some Chapter 13 bankruptcy debtors who have to turn over 50% of any income tax refund received during the life of their Chapter 13 Plan. Others do not have to turn over any part of the refund. It simply depends on the facts of each debtor's case, what debts they owe, and how much they are paying to their unsecured creditors. If you have already filed a Chapter 13 bankruptcy check with your attorney to see if you need to turn over funds.
A Word of Caution
Do not forget to turn over your income tax refund to the trustee if he or she is entitled to it in your case. Many debtors are tempted to spend the funds when they receive them and don't think the trustee will do anything if they don't receive the money. Other debtors have already received their discharge by the time that they receive their income tax refund and don't believe they should turn the money over to the trustee. If you have filed a bankruptcy and are not sure what portion, if any, you are required to turn over to the bankruptcy trustee contact your lawyer to double check. If you fail to turn over an income tax refund ordered to be turned over by the court a Chapter 7 Trustee can ask for the Court to revoke your discharge. A Chapter 13 Trustee could can ask that your case be dismissed. Further, the trustees will take these measures, as they have a duty to recover these funds for your creditors.
If you believe you need to file a bankruptcy and live in Carmel, Indianapolis, Noblesville, Tipton, Fishers, Zionsville or Kokomo, Indiana, please do not hesitate to contact me for your free initial consultation. I can be reached at erika@halcombsingler.comm, 317-575-8222 or via the contact section of Halcomb Singler's website. Please post any questions to this blog, as I review it often and if you want to hear more about Indiana Bankruptcy please "follow" my blog by clicking on the follow button on the top of the page.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
So the answer is.....it depends where you are at in the bankruptcy process, whether any of your income tax refund is attributable to the earned income credit and whether you have filed a Chapter 7 or Chapter 13 Bankruptcy Petition.
Prior to filing of Chapter 7 Bankruptcy Petition
If you have not yet filed your Chapter 7 bankruptcy petition, you are not yet subject to a claim from the bankruptcy trustee. In the event you are entitled to an income tax refund, it is typically best to wait for your income tax refund to come in prior to the filing of your bankruptcy petition. That being said, in Indiana the exemption for cash, whether it be in the bank, in cash or under the mattress is $350.00 for an individual or $700.00 for joint bankruptcy filers. This means that if you receive a $2,000.00 income tax refund and then file bankruptcy prior to spending this money that the trustee could claim all but your $350.00 or $700.00 exemption. I have found that most folks preparing to file for bankruptcy have many things they could do with that money that they have been putting off for a long time. For example, I have had clients obtain car repairs, buy a new mattress, buy some new work clothes, pay for prescription drugs, or catch up their car or mortgage payments with this money. It is permissible to spend the money on living expenses prior to filing bankruptcy. Some people also spend their income tax refunds on bankruptcy attorney fees, which are typically a flat fee. Since there is a fine line between what may and may not be deemed a permissible expense to a bankruptcy trustee, I typically ask clients to let me know what they would like to spend their income tax refund on so that I can let them know whether or not I believe it is a good idea. Examples of things that I have advised clients not to spend income tax refunds on include a vacation, a big screen television, or paying off debts that will be discharged in their bankruptcy.
After the filing of your Chapter 7 Bankruptcy Petition
If you have filed your bankruptcy petition prior to the receipt of your income tax refund the trustee may have a claim to at least a portion of your income tax refund. How much of a claim the trustee has to your income tax refund depends on when your bankruptcy petition was filed. The trustee's claim to your income tax refund is pro-rated through the tax year of the bankruptcy filing. For example, if you filed a bankruptcy on June 30, 2010, which is half way through the year, the trustee could claim 50% of your 2010 income tax refund received in 2011. If your bankruptcy petition was filed in January, 2011, prior to the receipt of your income tax refund, the trustee may claim 100% of the 2010 refund because you filed your case after the year had ended.
Earned Income Credit Exception
It should also be noted that if a portion of your income tax refund is attributable to the earned income credit that the trustee cannot claim that portion of your refund. Many people also believe that the child tax credit is exempt from the trustee's claim, but this is not correct. The only portion of your income tax refund not subject to the bankruptcy trustee's claim is the earned income credit.
Chapter 13 and your Income Tax Refund
Whether or not your income tax refund needs to be turned over to the Chapter 13 bankruptcy trustee depends on your Chapter 13 repayment plan. There are some Chapter 13 bankruptcy debtors who have to turn over 50% of any income tax refund received during the life of their Chapter 13 Plan. Others do not have to turn over any part of the refund. It simply depends on the facts of each debtor's case, what debts they owe, and how much they are paying to their unsecured creditors. If you have already filed a Chapter 13 bankruptcy check with your attorney to see if you need to turn over funds.
A Word of Caution
Do not forget to turn over your income tax refund to the trustee if he or she is entitled to it in your case. Many debtors are tempted to spend the funds when they receive them and don't think the trustee will do anything if they don't receive the money. Other debtors have already received their discharge by the time that they receive their income tax refund and don't believe they should turn the money over to the trustee. If you have filed a bankruptcy and are not sure what portion, if any, you are required to turn over to the bankruptcy trustee contact your lawyer to double check. If you fail to turn over an income tax refund ordered to be turned over by the court a Chapter 7 Trustee can ask for the Court to revoke your discharge. A Chapter 13 Trustee could can ask that your case be dismissed. Further, the trustees will take these measures, as they have a duty to recover these funds for your creditors.
If you believe you need to file a bankruptcy and live in Carmel, Indianapolis, Noblesville, Tipton, Fishers, Zionsville or Kokomo, Indiana, please do not hesitate to contact me for your free initial consultation. I can be reached at erika@halcombsingler.comm, 317-575-8222 or via the contact section of Halcomb Singler's website. Please post any questions to this blog, as I review it often and if you want to hear more about Indiana Bankruptcy please "follow" my blog by clicking on the follow button on the top of the page.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
Saturday, February 5, 2011
Discharging Student Loans in Bankruptcy
Unfortunately, as a bankruptcy lawyer, I often have to advise people that discharging student loans in bankruptcy is an uphill battle. Student loan debt is typically not discharged in bankruptcy, but it is possible for some debtors to discharge their student loans. In order to attempt to discharge student loans, the debtor must file an adversary proceeding in their underlying bankruptcy case asserting that the loan should be discharged. An adversary proceeding is basically a lawsuit in the bankruptcy court that is related, but separate from the underlying bankruptcy case. An adversary proceeding is much more like typical civil litigation with discovery, depositions and summary judgment motions than the underlying bankruptcy case, which typically only has one meeting of creditors and no hearings in front of the bankruptcy judge. In addition, since an adversary proceeding requires a lot of additional work and time, bankruptcy attorneys almost never include representation in an adversary proceeding in a flat fee bankruptcy case. It is typical for bankruptcy attorneys to charge an hourly rate for representation in an adversary proceeding.
In order for a debtor to win an adversary proceeding asserting dischargeability of student loans, he or she must show that the student loan debt causes an undue hardship. However, an undue hardship is not defined in the bankruptcy code. Therefore, what exactly qualifies as an undue hardship is determined by caselaw. In the Southern District of Indiana Bankruptcy Court in order to prove undue hardship a debtor must prove the following:
1. he cannot maintain, based on his current income and expenses, a minimal standard of living for himself and his dependents if he is forced to repay the loan; and
2. additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loan; and
3. the debtor has made a good faith effort to repay the loan.
It is important to note that all three of the above factors must be proved by the bankruptcy debtor to the judge or the judge will rule against the dischargeability of the student loan. Therefore, the judge will start his inquiry examining the debtor's living expenses. Specifically, the judge will examine the debtor's living expenses are reasonable and whether repayment of the student loan will leave the debtor unable to provide a minimal standard of living for himself and his dependents. If the judge feels that the debtor's expenses are inflated or that he has enough money to pay the student loan based on the debtor's income, the inquiry is over and the student loan will not be discharged in your bankruptcy.
If the debtor is able to prove the first prong of the above test, the judge will examine whether the circumstances that would make it a financial hardship to repay the student loan will persist for a significant portion of the repayment period of the student loan. Therefore, if the reason that the debtor would not be able to maintain a minimal standard of living while repaying a student loan is that he has recently been diagnosed with a disease that makes it impossible for him to work the judge would decide whether that circumstance will continue for a significant portion of the repayment period of the student loan. For example, if the debtor had cancer when he filed the adversary proceeding, but the cancer goes into remission by the time the judge hears the adversary proceeding and the debtor is able to go back to work making enough money to repay the student loan the debtor is likely going to lose the adversary proceeding. On the other hand, if the reason the debtor had to file bankruptcy in the first place was that he had massive medical bills and the debtor has a disease that is permanent and will not be able to work at any point in the near future, there is a good chance that the judge will find the debtor meets the second prong of the test.
If the debtor are able to prove the first two prongs of the test, the Court will look at whether he has made a good faith effort to repay the loan. The more payments the debtor has made and the greater the period of time that has passed since the student loan proceeds were distributed, the better the chances of discharging the student loan. On the other hand, if the debtor took out a $10,000.00 loan 10 months prior to filing bankruptcy and made one $200.00 payment on it prior to the filing of your petition, chances the debtor will not meet this test and will be stuck paying on the student loan after bankruptcy.
If you are reading this thinking that it is tough to have your student loan be determined non-dischargeable you are right. I typically tell my clients at Halcomb Singler, LLP, that they don't really want to be the debtor who is able to discharge their loan because it usually requires them to be in a very bad financial situation and often a poor state of health or some other factor beyond their control. However, it is important to not that it is not impossible to discharge a student loan in bankruptcy.
If you are considering bankruptcy and live in the Northern Indianapolis, Carmel, Fishers, Noblesville, Zionsville, Tipton or Anderson please feel free to contact me at 317-575-8222 or just click here. There is no fee for this consultation and I would be happy to answer your questions about bankruptcy.
Halcomb Singler, LLP, is a debt relief agency. It helps people file for bankruptcy under the bankruptcy code. No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so. The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.
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