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It can be very difficult, if not impossible, to discharge student loans through bankruptcy. Courts require that you prove it would cause an undue hardship for you to pay. The problem with this is that Congress has never defined what constitutes an “undue hardship,” thus leaving it in the hands of many courts to determine if debtors should or should not have to repay their student loans. The problem is, for many, the existence of student loan debt makes it hard to pay for any other form of credit.

No Definition for Undue Hardship

According to a 2017 report from the Consumer Financial Protection Bureau, there are around 44 million borrowers with student debt. That outstanding student debt sits at about $1.4 trillion. With these staggering numbers, it’s unreal that we have not decided on a way to deal with student loan debt as a nation.

According to the National Consumer Law Center, the Brunner test is currently being used to define undue hardship. It’s based on three factors that borrowers must prove:

1. Would you be able to maintain a minimal standard of living if you had to repay the loan?
2. Are the financial difficulties you face temporary, or are they expected to continue for several years?
3. Have you made efforts to keep up with your student loan payments before filing for bankruptcy?

A borrower must prove paying back debt will prove an undue hardship and will continue to prove an undue hardship.
That rule may be changing though.
The Department of Education is currently re-evaluating these criteria and developing guidance on determining when a borrower is experiencing undue hardship. It’s also looking at whether to change how each factor implements the decision as well as how to make student loan discharges more accessible for borrowers who need relief.
Time will tell what happens with the decision regarding student loan debt. In the mean time, if you are suffering under overwhelming amounts of debt, there are options for you including debt consolidation of your other debt, and also bankruptcy.

Bankruptcy Abuse Prevention and Consumer Protection Act

In 2005 the bank lobby enacted the Bankruptcy Abuse Prevention and Consumer Protection Act. This act essentially sealed the fate on private student loan debt – making it almost completely (except for extreme cases) nondischargeable in bankruptcy. Prior to 2005, only federal student loans were difficult to get discharged.

That change quickly meant a lifetime of indentured servitude to student loan debt payments for American families who had taken out loans to ensure the well-being of their college-bound children. Once one of those children graduated from college they were soon met with a struggling job market that could offer very little in terms of employment. Thus, the interest on the loan piles up. In extreme cases, this leads to default. But what’s most frustrating in all of this is the fact that this debt is not dischargeable in bankruptcy, and worse, it is hardly ever forgiven.

No “Re-Start” for Those with Student Loans

Even mortgage debt is dischargeable in bankruptcy and through foreclosure. While not ideal, families are able to re-start. But with student loans, there’s no sense of a “re-start.” This form of debt cannot be discharged, and even worse, banks and debt collectors can get a lien on not only the student’s home, but also the parent’s home (if they co-signed for the loan) and garnish wages and garnish bank accounts.

Privately Held Student Loans

Private lenders — banks, credit unions, and other financial firms that provide student education loans — often take a lot of flack for being unwilling to negotiate with borrowers struggling with repayment. Borrowers are often at the mercy of these private lenders who hold 8 percent of the $1.18 trillion student loan market due to the fact that, according to lenders, student loans are packaged into securities and then sold to investors, thus creating restrictions on the contracts. These restrictions make it hard for lenders to adjust the terms of the repayment for borrowers.

When Are Student Loans Dischargeable?

Student loans are only dischargeable in bankruptcy if you can prove to a judge that you have an “undue hardship” that makes it impossible for you to pay your debt. Examples of an undue hardship include a disability that is severe enough that it prevents you from working.

Statistics to be Aware Of

A lot of people that have student loan debt who file bankruptcy do not ask for their loans to be forgiven because they have heard it is impossible. Here are some statistics you must know:

• According to a Harvard law school study, 99.9% of bankruptcy filers that have educational debt don’t ask for forgiveness.
• 40% of debtors who do request for relief from student loans in bankruptcy are granted partial or total discharge of the student loans.
• Every year 70,000 debtors that file bankruptcy actually qualify to discharge some or all of their student loan debt.

You Have to Qualify

To be eligible for student loan debts to be discharged, you must first qualify. You will need to follow a set procedure, outlined below, to discharge your debt.

Procedure to Discharge your Student Loans in Bankruptcy:

You must first file a formal complaint called a Complaint to Determine Dischargeability with the bankruptcy court. You will then need to prove to the court that payment of your loans will cause an undue hardship.Most likely a test will be used to determine undue hardship. This test varies between courts, but usually the Brunner test is used. Here are three circumstances you must meet to qualify for the Brunner test:

Poverty. Based upon your current income and expenses, you will be unable to maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans.
Persistence. Your current financial situation is likely to continue for a significant part of the repayment period.
Good faith. You have made a good faith effort to repay your student loans.
The Totality of the Circumstances test examines all relevant factors in your case.
There is also special test for Health Education Assistance Loans (HEAL). You will have to show that the loan became due more than seven years ago and repayment would cause an “unconscionable” burden on your life.

Most courts look at the undue hardship tests as all or nothing – either you qualify to get the whole loan discharged, or you do not. But some courts have discharged a portion of a debtor’s student loan.

Three Common Characteristics

According to a Harvard study, debtors who were successful in discharging some or all of their student loans through bankruptcy had at least one of these common characteristics: they were unemployed, had a medical hardship, or had a lower income the year before filing for bankruptcy.

You Must File for Chapter 7 Bankruptcy

If you are filing for bankruptcy to try and discharge student loan debt you must file for Chapter 7 bankruptcy. Chapter 7 bankruptcy allows immediate forgiveness of all unsecured debts. This is different from Chapter 13 bankruptcy, which establishes a debt repayment plan that allows you to discharge your debts over a period of three years.

Managing Other Debt

One other thing that might help student loan debt is to find a way to manage your other debt through debt consolidation. Streamlining debts can help to free yourself from financial burden while lowering costs. But you’ll want to understand just what debt consolidation is so that you can decide if it’s for you. If you’re able to pay off your debts within 6 months to a year, you might just consider being really strict. If you look at your debt and see years and years of potentially impossible saving, then you might consider debt consolidation.

Debt Consolidation Companies

A lot of times willpower is not enough to help debtors out of the hole. It’s important that you analyze your spending habits. Going out to dinner every night for a delicious but extravagant meal will not help you pay down your $33,000 Visa debt. You’re going to need to make some changes. But if you have made those changes and you still are not reaping the rewards of your new debt habits, then you might want to seek the help of an expert.

That’s exactly where a debt consolidation company comes in. These companies are kind of like your best friend that stops you from eating that fourth chocolate chip cookie. Debt consolidation companies are there to “save you from yourself” and help you make the right financial moves before your “inner cookie monster” takes over.

Here’s what a debt consolidation (a.k.a. debt management or credit counseling) does:

• Closes credit accounts so you cannot use them.
• Sets up an automated monthly payment based on your budget that gets distributed it to your creditors.
• In some cases, they can negotiate lower APRs or reduced late fees with your creditors

Considering Debt Consolidation

Debt consolidation can be helpful to anyone: whether you’re considering bankruptcy, or if you are just trying to get a handle on your finances.

What Is Debt Consolidation?

Debt consolidation means that all of your smaller loans get paid off with one large loan. So you essentially get one lump sum to pay off your smaller loans so that you only have one monthly payment rather than several monthly payments. The theory behind this is one payment is easier to manage than several. And the main goal is to lower the interest rate and monthly payments while paying off your debt in a quicker amount of time.

Debt Settlement

It’s important to note that debt consolidation is not the same as debt settlement. Debt consolidation allows you to pay your debts in full without causing negative consequences to your credit. Debt settlement is the process of paying off debt to a creditor once a mutually agreed to sum is reached. This sum is usually less than what is owed. Typically, only unsecured debt (for example, credit cards and medical bills), is eligible for debt settlement. Debt settlement is often considered a risky process.

How Bankruptcy Can Help

If you do not meet the undue hardship criteria for student loan debt, bankruptcy can still help you in important ways. Mostly, you will be filing in order to control your other forms of debt. Filing for Chapter 13 bankruptcy can restructure your student loans along with other debt into a manageable three- to five-year payment plan.

Filing for Chapter 7 bankruptcy can eliminate your other debts such as credit card and medical bills, giving you some breathing room, so you can better manage your student loan debt.
Every situation is different. Our bankruptcy lawyers will work with you personally to craft a debt relief strategy that meets your unique goals and helps you get your student loan debt under control.

Working with Resnik Hayes Moradi LLP

Are you overwhelmed by student loan debt and looking for financial relief? While in most cases, student loans cannot be discharged in bankruptcy, the attorneys at, can help you explore debt relief options that can make your situation much easier to bear. We are experienced bankruptcy lawyers who have helped numerous clients throughout the Los Angeles area achieve their debt relief goals. Call 213.699.3055 or contact us online for a free consultation with a California bankruptcy lawyer. It could be your first step on the road to debt relief.

Resnik Hayes Moradi LLP
510 W. Sixth Street Suite 1220
Los Angeles, CA 90014
Phone: (213) 699-3055
https://ibankruptcyattorneys.com

More seniors are filing for bankruptcy, leaving many to question if America is facing a “retirement crisis.”

U.S. Retirement Crisis

According to a paper by academic researchers affiliated with the Consumer Bankruptcy Project, “Older Americans are increasingly likely to file consumer bankruptcy and their representation among those in bankruptcy has never been higher.”

So what’s the potential reason? High health care costs and insufficient income are major factors. These issues stem mostly from a decreasing social safety net and changes in retirement plans.

Comparing data from the Consumer Bankruptcy Project between 1991 and the newly released numbers, researchers found more than a two-fold increase in the rate at which Americans aged 65 or more years filed for bankruptcy and an almost five-fold increase in the percentage of older Americans in the U.S. bankruptcy system.

“The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect,” they wrote.

According to the publishers of the paper, the trend will continue unless there are “significant policy changes that reassume the risks of aging and effectively [e]nsure the financial stability of older Americans.”

Understanding Chapter 7 and Chapter 13 Bankruptcy

If you are falling behind on making payments for medical expenses and are looking for protection from lurking creditors and mounting debt, chances are you’ve considered bankruptcy. There are different kinds of bankruptcy, including: Chapter 7 bankruptcy, Chapter 13 bankruptcy, and Chapter 11. Here’s some information about how they differ from each other.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy essentially allows you to wipe your financial slate clean without the worry of making “past due” amounts.  Certain property is sold and then used to repay debts. If there is no property that can be resold, many of the debts will be discharged, or cancelled, once the bankruptcy case concludes.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to reorganize your debt. You work with a bankruptcy attorney to set forth a plan to repay as much as your debt as possible during a 3-5 year period. You’ll be required by a bankruptcy court to provide detailed financial statements that support your proclaimed revenue and expenses. Once the plan is created you’ll have to make monthly payments to a trustee, who in turn pays off your creditors. Once you have completed the repayment plan, you are no longer responsible for any previous debts, even if through repayment, you were not required to pay the entire amount that was owed. Chapter 13 also stops increases on interest rates, such as the interest rate owed on a credit card.

Chapter 11 Bankruptcy

While Chapter 11 is typically filed by businesses and corporations, Chapter 11 can also be used by individuals. If you are the owner of a sole proprietorship, you are the debtor. You also do not have a separate identity from your business. Additionally, individuals will choose Chapter 11 if they can’t are unable to file Chapter 13 because their debts are too high, or their finances are complex.

A Chapter 11 restructuring plan can help a debtor balance his or her income and expenses while also regaining profitability and continuing operations. During Chapter 11, a debtor is also able to sell some or all of his or assets to pay down debt.

Typically, an individual will file Chapter 7 or Chapter 13, rather than Chapter 11.

Deciding on Chapter 7 or Chapter 13

Choosing between Chapter 13 and Chapter 7 bankruptcy is an important decision to make. Weighing both options with a bankruptcy attorney will help you decide which way to file. Also, to help your attorney help you to make the best decision, it’s necessary you provide them with accurate information regarding your finances. It’s also important to remember that some debt is not able to be discharged under either type of bankruptcy. These debts include: student loans, alimony, and child support.

Criteria for Chapter 7 bankruptcy

There are some criteria you will need to meet in order to be able to file for Chapter 7 bankruptcy.

1. Bankruptcy means test

This test compares the state’s median monthly family income to your family’s income. You may not be able to file Chapter 7 bankruptcy if your monthly income exceeds the state’s median income. This test is required if more than half your debt comes from consumer purchases other than business, tax, or tort debts (debts for injuries or damages you caused to someone else).

2. You are an individual, married couple filing jointly, or small business owner

3. No recent bankruptcy discharge

You are not legally able to file Chapter 7 bankruptcy if you had a previous Chapter 7 bankruptcy discharge within the past 8 years, or a Chapter 13 bankruptcy discharge within the past 6 years. The filing period starts the date your previous bankruptcy was filed, rather than when the bankruptcy was discharged.

4. No recent bankruptcy dismissal

You are not able to file Chapter 7 bankruptcy if you had a bankruptcy dismissed within the past 180 days for any of the following reasons: you violated a court order, abused the bankruptcy system, made a fraudulent bankruptcy filing, or requested a dismissal because a creditor requested the automatic stay be lifted.

5. Credit counseling required

To be able to file any type of bankruptcy, you are required to receive credit counseling from a government-approved credit counseling agency. You are not required to get counseling before filing bankruptcy, but it must be completed no more than 180 days prior to the bankruptcy discharge and it must include a two-hour financial management course.

Agencies offering this management course aren’t always non-profit, but they should be able to offer free or lower cost services.

Your bankruptcy case will be dismissed if you do not go through credit counseling within the specified time frame.

Considering Bankruptcy?

Because Chapter 7 can be so devastating, and can only be done once every seven years, it might be smart to weigh your particular combination of debt, income, and property before you decide it’s the option for you. And even then you might decide against it.

How Declaring Bankruptcy Can Help

Typically those who file for bankruptcy really do need it. Often the filer is already in a fragile economic position with large amounts of credit card debt when they are suddenly stuck with a bout of hard luck such as a loss of job, injury, divorce, or uninsured medical expenses that then result in mounting penalties and thus an unpayable amount of debt.

Bankruptcy law was designed to help people who need assistance to make a clean and quick break from the debt. In a few months it can wipe out unsecured debt such as credit and medical debts.

Exemption

But even if you find yourself faced with unpayable debt, you still may not need bankruptcy to protect your assets. Under the Exemption Laws of California, you may already be “judgment-proof.” If you are declared as “judgment-proof” you need not fear credit card companies simply because of debts owed to them. Unsecured creditors such as credit card companies cannot take your stuff if it’s exempt. Harassing phone calls can be stopped with a simple phone call or letter. But it’s important to remember that interest and penalties will continue to accumulate. Also, exemption laws do not protect property from all types of debts or all types of creditors. Typically, exemption laws do not protect against collection of child support or tax debts. And if you purchased property and pledged it as collateral for the purchase-money loan the lender can still take the property, regardless of any exemption law.

Non-dischargeable Debts

It’s important to remember there are some kinds of debts that bankruptcy can’t get rid of called “nondischargeable” debts. This type of debt generally includes child support, most student loans, and most tax debts. Even if you decide to declare bankruptcy you are still liable to pay these.

Working with a Bankruptcy Attorney

Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Because of this, it’s highly advised that you work with a bankruptcy attorney such as the ones at Resnilk Hayes Moradi that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time and we are happy to help you plan how to move forward with a solid financial future.

Resnik Hayes Moradi LLP

510 W. Sixth Street Suite 1220

Los Angeles, CA 90014

Phone: (213) 699-3055

https://ibankruptcyattorneys.com

Debt consolidation means that all of your smaller loans get paid off with one large loan. So you essentially get one lump sum to pay off your smaller loans so that you only have one monthly payment rather than several monthly payments. The theory behind this is one payment is easier to manage than several. And the main goal is that consolidation lowers the interest rate and monthly payments while paying off your debt in a quicker amount of time.

What Debt Consolidation Companies Do

Here’s what a debt consolidation (a.k.a. debt management or credit counseling) does:

• Closes credit accounts so you cannot use them.
• Sets up an automated monthly payment based on your budget that gets distributed it to your creditors.
• In some cases, they can negotiate lower APRs or reduced late fees with your creditors

Debt Settlement

It’s important to note that debt consolidation is not the same as debt settlement. Debt consolidation allows you to pay your debts in full without causing negative consequences to your credit. Debt settlement is the process of paying off debt to a creditor once a mutually agreed to sum is reached. This sum is usually less than what is owed. Typically, only unsecured debt (for example, credit cards and medical bills), is eligible for debt settlement. Debt settlement is often considered a risky process.

Understanding Secured vs. Unsecured Loans

A secured loan, such as a mortgage or a car loan, means you pledge the property, your home or your car, to secure the repayment of the loan. Here’s an example: you obtain a mortgage loan – the house is security for repayment. If you do not make the home, the mortgage lag lender can take the house back through the process of foreclosure to satisfy the loan.

Unsecured loans differ in that they are based only on your promise to pay. These loans are not secured by property that can be foreclosed on or repossessed to pay back the loan. Credit cards and student loans are technically unsecured loans because there’s nothing that can be directly repossessed if the borrower does not pay the loans back. Unsecured loans have higher interest rates because they carry more risk for the lender.

Debt Consolidation Through Secured Loans

Debt consolidation is a little easier when it comes to secured loans. Because there are physical “securities” that exist for repayment, they are seen as safer for the lender. For example, you can refinance a home, take out a second mortgage, or get a home equity line of credit. Another example is your car loan – the automobile is used as collateral in case you cannot pay back the loan. Assets can also be used as security for a loan. A 401K loan uses your retirement fund as collateral. Life insurance policies can be used if they have cash values. Financing firms can often loan you money against lawsuit claims, lottery winnings, and annuities.

Pros of Consolidating With Secured Loans

Often, secured loans carry lower interest rates than unsecured loans because they are safer for lenders. This fact can help you save your money on interest payments. Lower interest rates tend to make monthly payments lower and thus more affordable. Rarely, but in some cases interest payments are even tax deductible.

Cons of Consolidating With Secured Loans

The biggest con of consolidating with secured loans might seem obvious: when you pledge your assets as collateral and you cannot pay back the loan, you are putting your property at risk of being foreclosed on or repossessed. If you’re unable to pay the loan back, you run the rid of losing your house, car, life insurance, retirement fund, or whatever else you might have used to secure the loan. And certain assets, such as life insurance or retirement funds, may not be available to you if the loan is not paid back before you need to use them.

Debt Consolidation Through Unsecured Loans

Unsecured personal debt consolidation loans used to be quite common, but they are less likely to be available to people seeking them today. Usually this type of loan requires a borrower to have very good credit. A credit card or personal loan debt for consolidation is often given with a no interest, or low interest, introductory rate. Often times this amount balloons after a specified amount of time.

Pros of Consolidating With Unsecured Loans

The biggest benefit to unsecured debt consolidation loan is that no property is placed at risk. Also, an interest rate might balloon to higher than the rate on a secured loan, but it can often be distributed over several different credit card balances, thereby lowering your interest burden and your payment.

Balance Transfer Options

Balance transfer options on no-interest or low-interest credit card offers can be a very useful tool, but they can often be tricky. Check there is no transfer fee in the fine print which negates the savings.  Also, the no-interest or low-interest period is generally limited to a set amount of months. You’ll want to be sure you can pay the debt off during this time. If not, you run the risk of paying a much higher interest rate once the period expires.

If your debt is too high to be consolidated, you might want to consider bankruptcy. A bankruptcy attorney will be able to look at your financial situation and determine if bankruptcy is a viable option for you. They will also evaluate your options for avoiding bankruptcy if other options exist. There are many different ways to discharge your debt and find the financial relief you have been looking for.

Working with a Bankruptcy Attorney

Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Because of this, it’s highly advised that you work with a bankruptcy attorney such as the ones at Resnilk Hayes Moradi  that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time and we are happy to help you plan how to move forward with a solid financial future.

Resnik Hayes Moradi LLP

510 W. Sixth Street Suite 1220

Los Angeles, CA 90014

Phone: (213) 699-3055

https://ibankruptcyattorneys.com

A common question during bankruptcy is if social security payments will be garnished to pay off creditors. Below we discuss how social security is handled during both Chapter 7 and Chapter 13 bankruptcies.

What is Social Security?

Before we discuss how Social Security is treated in Chapter 7 and Chapter 13 bankruptcies, it’s important to review what Social Security is.

Social Security is a program that is meant to provide funds as a form of economic security for the public. The United States Social Security program was established in 1935 and provides old age, disability, and survivors insurance, in additional to supplemental security income to elderly or disabled people.

This money is accrued through employers and employees through Social Security taxes. Money raised from this tax program is then primarily used to provide benefits to US citizens who have reached retirement age or are otherwise currently eligible. The amount a citizen receives as their Social Security benefits is based on the amount of Social Security taxes he or she has paid over the course of their working career. This means that those who have had larger incomes tend to get greater Social Security benefits. Social Security also pays a disproportionate amount to people who have earned low incomes.

Chapter 7

When you file a Chapter 7 bankruptcy, almost all of your assets and property are liquidated and thus become property of the bankruptcy estate that is sold to allow you to repay your debts. There are some exceptions to this though.

During your Chapter 7 bankruptcy, a bankruptcy trustee is appointed and given the authority to sell your assets so that you are able to pay your creditors.  Just because your assets are being sold, that does not mean that all of your property needs to be sold.

Social Security and Chapter 7

When you apply for Chapter 7 bankruptcy, you are first required to take a means test that is based on the amount of income you receive. It is then determined if you have “the means” to pay back unsecured creditors. If you are receiving Social Security benefits, you are not required to include that source of income during your Chapter 7 means test.

Means Test

The means test will require you disclose all income from all sources, except Social Security benefits, that you have received during the six-month period prior to filing the bankruptcy. This income is then used to calculate what is called a current monthly income, or CMI.

If your CMI is less than the median income for your specific state’s median income for a similar household, you will automatically pass the means test. This means that your household – amount of family members and income – will be compared to what the state has deemed as a similar household’s income. A family of four’s income will be compared to a family of four’s income.

If your CMI is above the median income, that does not mean you fail the means test. In most cases, the bankruptcy petitioner will just need to answer more questions on the means test in order to qualify.

Social Security benefits do not count as income for means test purposes, so you will not be required to list the amount of Social Security income you receive.

Disclose Social Security Income in Budget

While you do not need to disclose your Social Security income in the means test, you will need to disclose the amount on Schedules I of the bankruptcy paperwork. Schedule I and Schedule J are two forms that are needed for Chapter 7 bankruptcy.

Schedule I: snapshot of current income at the time you file bankruptcy.

Schedule J: list of current expenses.

It should be noted that if your budget shows that you are receiving a large amount of disposable income every month, you can still be disqualified from being able to file for Chapter 7. This can happen even if you pass the means test.

Because this can be a complicated process, you should work with a bankruptcy attorney to determine the best form of bankruptcy you should file for.

Often times, people do not qualify for Chapter 7, but do qualify for Chapter 13.

Chapter 13

Chapter 13 bankruptcy is designed to allow you to keep all of your property, but is also determined by the type of property you own. The amount of your nonexempt property affects how much unsecured creditors get paid during your bankruptcy process. And to avoid foreclosure or repossession, you still need to keep up with the payments you make for you secured debt, such as mortgages or car loans. During Chapter 13, you repay creditors in full, or in part, during a Chapter 13 repayment plan. That plan typically lasts from three to five years, and at the end of the repayment period, your debts are discharged.

Differences in Chapter 7 and 13 Bankruptcy

In Chapter 13 bankruptcy, a trustee will not sell your nonexempt assets and distribute the proceeds to your creditors. That’s how it works in Chapter 7 bankruptcy. Rather, you will need to put together a repayment plan that shows your creditors how you plan to pay back some or all of your creditors. You get to keep your property in exchange for paying back a certain amount of the debt you owe. But remember that the more nonexempt assets you have, the more you will need to pay to unsecured creditors.

When you file for Chapter 7 bankruptcy, a trustee takes the nonexempt property, sells it, and uses the proceeds to pay your general unsecured creditors. But because you keep all of your property with Chapter 13, it’s unfair to your unsecured creditors if they do not get paid as much as they would have had you filed for Chapter 7.

Because of this, if you file Chapter 13 and create a repayment plan, you will still need to pay the general unsecured creditors a dividend at least equal to the value of your nonexempt assets. So if you have a large amount of nonexempt property, you hay have to repay the unsecured debts in full.

Chapter 13 and Social Security

While more courts are increasingly allowing debtors to keep Social Security payments in Chapter 13 bankruptcy, it will depend on where you file for bankruptcy.

All income, including your Social Security income, needs to be disclosed on your Chapter 13 bankruptcy petition and schedules. All disposable income is required to be contributed to the repayment plan. The higher the amount of disposable income you have, the more you are required to pay unsecured creditors.

Where You File

Federal appellate courts have ruled that social security income should not be included in your current monthly income (CMI) if you live in the following states: Arkansas, Colorado, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, or Wyoming.

Working with a Bankruptcy Attorney

When you decide to file bankruptcy, you should consider working with an attorney. As you can see from the above, there are many factors that need to be considered during your petition. A bankruptcy attorney can advise you on the following:

• the type of bankruptcy you should file
• how bankruptcy can help you
• what to expect during the process, and
• any potential difficulties they see with your case

Additionally, you should be able to address any questions or concerns you might have.

The Bankruptcy Process

Filing for bankruptcy requires you to fill out a packet of forms, including the Schedule I and Schedule J discussed above. Your bankruptcy attorney will have specialized software that helps to guide you through the process and also ensures that everything is prepared for the court. You will be required to provide information about your income, expenses, assets, and debts. Working with an attorney will ensure that the information on these forms is filled out accurately, and filed correctly.

Bankruptcy Hearings

You will need to attend a meeting of creditors after you file for bankruptcy. Depending on your specific filing, you might need to attend additional hearings. Your lawyer will advise you on if you need to be in attendance, or if they are able to represent you without you needing to be there, as sometimes you will not be required to be in attendance.

At all times your lawyer will help you to understand the process, as well as ensure that the court has all the information it needs to obtain from you, in addition to any forms.

Working with a Bankruptcy Attorney

Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Because of this, it’s highly advised that you work with a bankruptcy attorney such as the ones at Resnilk Hayes Moradi  that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time and we are happy to help you plan how to move forward with a solid financial future.

Resnik Hayes Moradi LLP

510 W. Sixth Street Suite 1220

Los Angeles, CA 90014

Phone: (213) 699-3055

https://ibankruptcyattorneys.com

You worked hard for what you’ve earned but things happen and if you’re at risk for losing the assets you’ve worked hard to achieve, you might want to consider bankruptcy. Luckily, lawmakers have put things in place to shield the assets that you’ve worked so hard for. Here are some of the ways you can protect your hard-earned assets even in bankruptcy.

Laws to Protect Your Assets

State and federal laws have been set for what assets can and can’t be garnished by creditors during bankruptcy. These include:

• Traditional and Roth IRAs
• Qualified Retirement Plans
• Homesteads. Important Note: the amount of protection you will get on your home varies greatly from state to state. While some states offer unlimited protection, others other limited to no protection.
  
• Annuities and Life Insurance. State laws also govern the level of protection that applies to these.

Other Ways to Secure Assets

Asset protection might seem to have a bad wrap, but there are legitimate ways to protect your assets. Some methods include asset protection trusts, accounts-receivable financing, stripping out your equity, and family limited partnerships.

Understanding Chapter 7 and Chapter 13 Bankruptcy

If you are falling behind on making payments for medical expenses and are looking for protection from lurking creditors and mounting debt, chances are you’ve considered bankruptcy. There are different kinds of bankruptcy, including Chapter 7, Chapter 13, and Chapter 11. Here’s some information about how they differ from each other.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy essentially allows you to wipe your financial slate clean without the worry of making “past due” amounts.  Certain property is sold and then used to repay debts. If there is no property that can be resold, many of the debts will be discharged, or cancelled, once the bankruptcy case concludes.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to reorganize your debt. You work with a bankruptcy attorney to set forth a plan to repay as much as your debt as possible during a 3-5 year period. You’ll be required by a bankruptcy court to provide detailed financial statements that support your proclaimed revenue and expenses. Once the plan is created you’ll have to make monthly payments to a trustee, who in turn pays off your creditors. Once you have completed the repayment plan, you are no longer responsible for any previous debts, even if through repayment, you were not required to pay the entire amount that was owed. Chapter 13 also stops increases on interest rates, such as the interest rate owed on a credit card. 

Chapter 11 Bankruptcy

While Chapter 11 is typically filed by businesses and corporations, Chapter 11 can also be used by individuals. If you are the owner of a sole proprietorship, you are the debtor. You also do not have a separate identity from your business. Additionally, individuals will choose Chapter 11 if they can’t are unable to file Chapter 13 because their debts are too high, or their finances are complex.

A Chapter 11 restructuring plan can help a debtor balance his or her income and expenses while also regaining profitability and continuing operations. During Chapter 11, a debtor is also able to sell some or all of his or assets to pay down debt.

Typically, an individual will file Chapter 7 or Chapter 13, rather than Chapter 11.

Which Form Should You File?

Choosing between Chapter 13 and Chapter 7 bankruptcy is an important decision to make. Weighing both options with a bankruptcy attorney will help you decide which way to file. Also, to help your attorney help you to make the best decision, it’s necessary you provide them with accurate information regarding your finances. It’s also important to remember that some debt is not able to be discharged under either type of bankruptcy. These debts include student loans, alimony, and child support.

Chapter 7 Bankruptcy Criteria

There are some criteria you will need to meet in order to be able to file for Chapter 7 bankruptcy.

1. Bankruptcy means test

This test compares the state’s median monthly family income to your family’s income. You may not be able to file Chapter 7 bankruptcy if your monthly income exceeds the state’s median income. This test is required if more than half your debt comes from consumer purchases other than business, tax, or tort debts (debts for injuries or damages you caused to someone else).

2. You are an individual, married couple filing jointly, or small business owner

3. No recent bankruptcy discharge

You are not legally able to file Chapter 7 bankruptcy if you had a previous Chapter 7 bankruptcy discharge within the past 8 years, or a Chapter 13 bankruptcy discharge within the past 6 years. The filing period starts the date your previous bankruptcy was filed, rather than when the bankruptcy was discharged.

4. No recent bankruptcy dismissal

You are not able to file Chapter 7 bankruptcy if you had a bankruptcy dismissed within the past 180 days for any of the following reasons: you violated a court order, abused the bankruptcy system, made a fraudulent bankruptcy filing, or requested a dismissal because a creditor requested the automatic stay be lifted.

5. Credit counseling required

To be able to file any type of bankruptcy, you are required to receive credit counseling from a government-approved credit counseling agency. You are not required to get counseling before filing bankruptcy, but it must be completed no more than 180 days prior to the bankruptcy discharge and it must include a two-hour financial management course.

Agencies offering this management course aren’t always non-profit, but they should be able to offer free or lower cost services.

Your bankruptcy case will be dismissed if you do not go through credit counseling within the specified time frame.

Considering Bankruptcy?

Chapter 7, because it wipes out all your debt and many of your assets, it can be so devastating. It also can only be done once every seven years, so it might be smart to weigh your particular combination of debt, income, and property before you decide it’s the option for you. And even then you might decide against it.

How Declaring Bankruptcy Can Help

Typically those who file for bankruptcy really do need it. Often the filer is already in a fragile economic position with large amounts of credit card debt when they are suddenly stuck with a bout of hard luck such as a loss of job, injury, divorce, or uninsured medical expenses that then result in mounting penalties and thus an unpayable amount of debt.

Bankruptcy law was designed to help people who need assistance to make a clean and quick break from the debt. In a few months, it can wipe out unsecured debt such as credit and medical debts.

Exemption

Even if you find yourself faced with unpayable debt, you still may not need bankruptcy to protect your assets. Under the Exemption Laws of California, you may already be “judgment-proof.” If you are declared as “judgment-proof,” don’t worry. There’s no need to fear credit card companies simply because of debts owed to them. Unsecured creditors such as credit card companies cannot take your stuff if it’s exempt. Harassing phone calls can be stopped with a simple phone call or letter. But it’s important to remember that interest and penalties will continue to accumulate. Also, exemption laws do not protect property from all types of debts or all types of creditors. Typically, exemption laws do not protect against collection of child support or tax debts. And if you purchased property and pledged it as collateral for the purchase-money loan the lender can still take the property, regardless of any exemption law.

Non-dischargeable Debts

It’s important to remember there are some kinds of debts that bankruptcy can’t get rid of called “nondischargeable” debts. This type of debt generally includes child support, most student loans, and most tax debts. Even if you decide to declare bankruptcy you are still liable to pay these.

Working with a Bankruptcy Attorney

Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Because of this, it’s highly advised that you work with a bankruptcy attorney such as the ones at Resnilk Hayes Moradi  that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time and we are happy to help you plan how to move forward with a solid financial future.

Resnik Hayes Moradi LLP

510 W. Sixth Street Suite 1220

Los Angeles, CA 90014

Phone: (213) 699-3055

https://ibankruptcyattorneys.com

Debt can feel, and be, insurmountable. Sometimes it feels like just when you get out from under the lion’s paw, there’s another paw waiting. Often times you are just barely free of debt and then something else happens – like a job loss, a divorce, or a medical emergency. When that happens, and you’ve already declared bankruptcy in the past, is there a way to get free again? There are actually no restrictions when it comes to how many bankruptcy cases you can declare. But if your debts have been discharged in bankruptcy (as is standard), you will need to wait a certain amount of time before you are able to discharge your debts again.

Types of Bankruptcy

Before you file for bankruptcy, it’s important to know what bankruptcy options exist for you. There are a couple options and a bankruptcy attorney will be able to advise you on the best option for you to file.

Chapter 7

When you file a Chapter 7 bankruptcy, almost all of your assets and property are liquidated and thus become the property of the bankruptcy estate. This estate is sold to allow you to repay your debts. There are some exceptions to this though.

During your Chapter 7 bankruptcy, a bankruptcy trustee is appointed and given the authority to sell your assets so that you are able to pay your creditors.  Just because your assets are being sold, that does not mean that all of your property needs to be sold.

Chapter 13

Chapter 13 bankruptcy is designed to allow you to keep all of your property but is also determined by your property. The amount of your nonexempt property affects how much-unsecured creditors get paid during your bankruptcy process. And to avoid foreclosure or repossession, you still need to keep up with the payments you make for you secured debt, such as mortgages or car loans.

Chapter 11 Bankruptcy

Under Chapter 11 bankruptcy, the business or individual (you can file as an individual or as a business) undergoes a reorganization in order to pay down its debt and reorganize its income and expenses while regaining its profits.  If your business is a corporation, limited liability company (LLC) or partnership, it can continue business operations during the bankruptcy process. While the business is making payments through the debt repayment plan, the business is able to continue day-to-day operations.

The Chapter 11 bankruptcy process can be a complex, and lengthy one. If you are facing Chapter 11, you’ll want to work with a bankruptcy attorney to understand the process and what you will need to do to move through it.  They will be able to explain the terminology in addition to what is legal, and what you will be required to do.

How Often are You Able to Declare Bankruptcy?

While it might not be advised to declare bankruptcy as often as you might want, unless a court has ordered otherwise, there are no restrictions for how many bankruptcy cases you are able to file.

There are certain time requirements for discharging debt though. “Discharging debt” is the main function and reason for filing for bankruptcy. This means that all of your debt has been forgiven and you are debt free. Your ability to file another bankruptcy and thus receive a discharge is dependent on these things:

• the type of bankruptcy (either 7, 13, 11, or any other form) you have previously filed
• the type of bankruptcy (either 7, 13, 11, or any other form) you are seeking to file
• how your previous bankruptcy was finalized: either through discharge, dismissal, or dismissal with prejudice
• when you previously filed.

Below we discuss some specifics, in terms of timing, of the above requirements.

Previously Filed Chapter 7 and Filing Chapter 7 Again

If you received a discharge in Chapter 7, you must wait eight years from the date you filed that case before you can file another Chapter 7 and receive a discharge. 

Previously Filed Chapter 13 and Filing Chapter 13 Again

If you received a discharge in Chapter 13, you must wait two years from the date you filed that case before you can file another Chapter 13 and receive a discharge. It usually takes three to five years for the repayment plan in Chapter 13 to be discharged. Because of this, once your first Chapter 13 is closed, you can immediately be eligible for discharge in a second Chapter 13 filing.

Previously Filed Chapter 7 and Filing Chapter 13 Now

If you received a discharge in Chapter 7, you must wait four years from the date you filed that case before you can file Chapter 13. This is often called a Chapter 20 bankruptcy and can be effective for paying off priority debts or catching up on a missed mortgage.

Previously Filed Chapter 13 and Filing Chapter 7 Now

If you received a discharge in Chapter 13, you must wait six years from the date you filed that case before you can file Chapter 7. It should be noted that there is an exception to this rule. The six-year limit does not apply if, during the Chapter 13 you did the following

• paid back all of your unsecured debts or
• paid back at least 70% of unsecured debts and your plan was proposed in good faith and your best effort. 

Dismissed with Prejudice Restrictions

A bankruptcy court can prohibit you from filing another bankruptcy case. This happens if the court dismisses your previous bankruptcy with prejudice. “Dismissed with Prejudice” means you failed to obey the court’s orders or tried to abuse the bankruptcy system. This typically happens if something illegal was done and is why you should always work with a bankruptcy attorney. It’s very easy for you to accidentally do something – unknowingly – and thus cause the court to deem it an illegal action. If this happens, a bankruptcy court can prohibit you from filing for another bankruptcy for a longer period of time than those specified above. A court is also able to forever preclude you from discharging debts that might have been discharged in the case that was dismissed with prejudice.

Is Filing for Bankruptcy “Bad”?

Bankruptcy and the filing of bankruptcy often gets a bad rep. The common story is that it can take years to recover. But a lot of times, bankruptcy can be just what you need for financial recovery and freedom.

While it’s true that filing for Chapter 13 or Chapter 7 bankruptcy has its downfalls – it will lower your credit score by 100 points or more and thus directly impact your ability to qualify for new credit cards, a mortgage loan, auto loan, or personal loan for a few years after you file – but that doesn’t mean that you should avoid it at all costs.

Bankruptcy can be seen as a last resort, but many people often say they wish they had filed sooner. When diverting all your money to pay off debt and that leaves you with no money for food or, living expenses, and there’s is nothing left over, that’s catastrophic, and then it makes sense to file for bankruptcy. If you find yourself in that spot, we advise you at least speak with a bankruptcy attorney that can advise you on your options.

When Bankruptcy Can Help

Here are some instances when bankruptcy can be helpful:

Liabilities Are More Than Assets

When you owe so much that your debts are far higher than the value of your assets. In these cases, it can be impossible for a consumer to actually catch up to their debt.

Negotiations Don’t Work

It’s always advised that before you decided to file for bankruptcy, that you try to work things out with your creditors. Creditors are often inclined to help out consumers as long as consumers are active in doing so. Many creditors are able to reduce the amount of money owed if you are able to prove you are struggling financially. You might need to provide copies of your most recent paycheck stubs and bank statements, or anything that will prove that your income has fallen or that your savings are depleted to your creditors before they are able to offer assistance.

This is the first step you should take in trying to deal with debt.

But if your creditors are not willing to negotiate, the only option you may have is to file for bankruptcy protection.  After you file, your bankruptcy trustee will be responsible for negotiating with the people you owe. A lot of times, these professional negotiators are more able to convince creditors to forgive at least some of your debt.

A Job Loss or Serious Illness

Job loss or serious illness can be devastating – and not just emotionally, but also financially.

Bills and debt tend to pile up quickly during these times, which can make it impossible to generate the monthly income you were once used to.

If job loss, medical emergency, or other financial disaster has made it impossible for you to come up with a monthly income, and there is no way that you will be able to recover in a quick amount of time, then bankruptcy can provide the relief you might need to help you recover from these financial setbacks.

Working with a Bankruptcy Attorney

Facing debt can be overwhelming. The bills can continue to pile up and the creditors can continue to harass you unless you take responsibility and take action. Working with a bankruptcy attorney to guide you through the process of debt consolidation and/or bankruptcy is the first step to getting back on to solid financial footing. The laws regarding bankruptcy can also be confusing. Because of this, it’s highly advised that you work with a bankruptcy attorney such as the ones at Resnilk Hayes Moradi  that can walk you through the process and clarify any questions or concerns you might have. There can be a lot of questions during this extremely stressful time and we are happy to help you plan how to move forward with a solid financial future.

Resnik Hayes Moradi LLP

510 W. Sixth Street Suite 1220

Los Angeles, CA 90014

Phone: (213) 699-3055

https://ibankruptcyattorneys.com