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tax refunds in bankruptcy

Tax Refunds In Bankruptcy

Your tax refund is an asset in bankruptcy. This is true whether you file Chapter 7 or Chapter 13. Your refund is treated differently in each chapter, but generally you can keep your tax refund in bankruptcy.

Chapter 7

In Chapter 7, your bankruptcy assets are any assets you already own, or reasonably expect to own. A tax refund is a great example. If you have not filed your taxes yet, but you know that you will receive a refund, that refund is part of your bankruptcy estate. Because the refund does not represent income earned in the last 60 days, it cannot be exempted under N.C.G.S. 1-362. It can, however, be exempt under N.C.G.S. 1C-1601(a)(2). This is commonly known as your “Wild Card” exemption. It can be applied to any assets.

By claiming an exemption, you are exercising your right to protect certain assets. Your Wild Card exemption is available to cover up to $5,000 of assets. So, as long as your refund is $5,000 or less, you can use your Wild Card exemption to protect it. If you’re filing with a spouse, you both have a Wild Card exemption, for a total of $10,000 in Wild Card exemption available.

By protecting your tax refunds in bankruptcy with an exemption, your bankruptcy case can move forward without the bankruptcy trustee taking that asset. You will receive your discharge, and when you receive your tax refund, it’s yours to keep.

Another option is to receive and spend your tax refund in bankruptcy before you file. So long as you spend the refund on normal living expenses, you are not running afoul of the bankruptcy rules. Additionally, if you purchase household goods like furniture, you can still protect those new purchases with your household exemption under N.C.G.S. 1C-1601(a)(4).

Chapter 13

If you are in Chapter 13, the same rules apply as outlined above for Chapter 7. However, these rules are only applicable to the year in which you are filing your Chapter 13. Because a Chapter 13 case runs for three to five years, you need to be concerned about future tax refunds in Chapter 13.

If you receive tax refunds in Chapter 13 in a year beyond your first year, you must disclose this refund to the Chapter 13 bankruptcy trustee. Generally, you are allowed to keep $1,000 per debtor each year. Additionally, if you have any unused Wild Card you can apply it to your tax refunds received in subsequent years. Lastly, if your tax return shows that your refund is due to an earned income credit or a child tax credit, the refund is yours to keep.

If you cannot protect your tax refund in Chapter 13 in the above manner, you can also petition the court to keep your refund due to the fact it is necessary for living expenses. An example would be that you have been putting off repairs to your home or vehicle, and the non-exempt tax refund will be used for those repairs. Quite often, clients are making ends meet but putting off normal and routine household expenditures to do so. For this reason, the court entertains a request to use your tax refund in Chapter 13 to get ‘caught up’ on household expenses.

Adjusting Your Withholding In Bankruptcy

One allowable way to help insure you don’t lose any money in Chapter 13 is to adjust your tax withholding. This way, rather than receive a large refund in bankruptcy at the end of the year, you receive more income each month. Your Schedule I and J filings in Chapter 13 should reflect this, and your overall budget will change slightly; however, it will help you avoid an annual chore of trying to prove to the Chapter 13 court that you should be allowed to keep your tax refund.

Speak With A Charlotte Bankruptcy Attorney Today

Bankruptcy is a very powerful solution with long-lasting positive effects. If you’d like to speak with a lawyer about filing bankruptcy, we’re here to help. Consultations are free and answering questions is part of the job. Call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out shortly.

Bankruptcy And Mortgage Payments

Bankruptcy And Mortgage Payments

If you’re wondering how bankruptcy and mortgage payments work together, there is good news. Most bankruptcy clients are pleasantly surprised to find out they can keep their home in bankruptcy. After all, for most of us our home is our largest investment.

Chapter 7 And Mortgage Payments

If you are filing Chapter 7, you can keep your home if your equity in the home does not exceed the allowable exemptions in bankruptcy. Generally speaking, this is $35,000 per spouse or owner. Your equity is defined as the fair market value minus the total debt securing the home. We can also make adjustments for cost of sale (realtor fees, etc.) as well as repairs that you might expect a home purchaser to request. You can find one estimate of the fair market value of your home at Zillow.com.

When you file Chapter 7, you should be current on your mortgage payments, or less than 30 days behind. By the time you have your 341 meeting (about 45 days after filing), you’ll want to be sure you are current.

Chapter 7 And Your Mortgage Obligation

By filing Chapter 7, your mortgage debt is discharged. This means you technically no longer owe it. However, if you want to keep the property, you’ll need to keep the debt that goes with it. You will be given the option to sign a Reaffirmation Agreement in Chapter 7. This agreement renews the contract terms between you and the mortgage company, to be exactly what they were before you filed Chapter 7.

There are instances where you can keep the home and avoid signing a reaffirmation agreement, and your Charlotte bankruptcy attorney can discuss those instances in detail with you. In summary, you can keep your home in Chapter 7 and you may sign a reaffirmation agreement to go with it.

Chapter 7 And Surrender Of Your Home

You can also surrender your home in Chapter 7 if the mortgage payments are too much for you, or if the home is “upside down” (mortgage balance is higher than the fair market value). By doing this in bankruptcy, you avoid a situation where the mortgage lender can pursue you for any loss they take on the property. Your Chapter 7 filing protects you. You simply give the lender the home, and walk away from the debt.

Chapter 13 And Mortgage Payments

If you want to keep your home in Chapter 13, you can do so. This is true even if you are behind on mortgage payments at the time you file. Chapter 13 is unique in that it allows you to continue to pay your normal mortgage payment while slowly making up the amount you were behind at the time of filing.

Provided your Chapter 13 plan is approved and you follow the rules of Chapter 13, there is nothing your mortgage lender can do to prevent a successful filing. In fact, your mortgage lender is probably happy they are being paid in Chapter 13. When your Chapter 13 ends, you will be current on your mortgage and all of your pre-petition back payments will be caught up.

Speak With A Charlotte Bankruptcy Lawyer Today

If you have questions about bankruptcy and mortgage payments, call us at 704.749.7747 to discuss your situation. You’ll get answers to your questions, and you’ll understand your options. You can also click for a FREE CASE EVALUATION and we will reach out to you to discuss your case.

Can I Keep My Bonus In Chapter 13

Can I Keep My Bonus In Chapter 13?

You can keep your bonus in Chapter 13 provided you account for it in your Net Disposable Income allocated to creditors. When you file Chapter 13, your payment is partly based upon your “Ability to Pay” your creditors. Your ability to pay your creditors is determined by providing the court with a monthly budget: income minus expenses.

Generally speaking, additional funds that come into your ownership during Chapter 13 are property of the bankruptcy estate. As such, your Charlotte bankruptcy attorney will seek approval for you to keep those funds if possible. In the case of a bonus in Chapter 13, so long as you have already accounted for the bonus in your monthly income and expenses calculations, you can keep the bonus. Your Chapter 13 bankruptcy attorney will work with you to do this. Lastly, the way to account for the bonus is to simply take the average bonus, divide it by 12 (months in the year) and add that amount to your gross income calculations.

Can I Keep Tax Refunds In Bankruptcy?

Tax refunds are not “income earned in the last sixty days,” and as such, they are not exempt assets under NC sec. 1-362. If you have exemptions remaining under NC sec. 1C-1601(a)(2), you can protect your tax refund with that exemption. That exemption is commonly known as the “Wild Card” exemption and can be applied to any assets.

In a Chapter 13, you must petition the court to keep your tax refund. Generally speaking, each debtor will be able to keep the first $1,000.00 of a tax refund. If your refund exceeds this amount, you will need approval from the court to keep it. Your Chapter 13 bankruptcy attorney will assist in notifying the trustee of your refund, and providing an explanation as to why you should be able to keep it. In most cases, if you have a list of home improvements or vehicle repairs which need to be done, you can allocate the funds to those items. It is quite common that you can keep your entire refund in Chapter 13, based on this analysis.

Bonus Not Yet Earned

You may be wondering if you can keep a bonus in Chapter 13, if you have not already earned the bonus.If you have a potential bonus which you have not yet earned, there is good case law which supports the contention that those funds are not part of the bankruptcy estate and therefore they will be yours to keep. Our firm, together with The Law Offices of Kevin Radey, won a case on this very issue, in the Western District of North Carolina. You can read that case summary on Bloomberg Law.

Speak With A Charlotte Bankruptcy Attorney Today

If you’re considering filing Chapter 7 or Chapter 13, speak with an attorney today. Bankruptcy is a powerful solution which immediately affects your life for the positive. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION and we will reach out to you.

can creditors take your property

Can Creditors Take Your Property?

The short answer is yes, creditors can take your property. However, they have to go to great length to do so. Below, we ask a few questions, and then provide some answers. Call us if you have questions—we’re here to help! 704.749.7747.

Is There A Valid Debt?

The first question when deciding the answer to the question “Can creditors can take your property?” is whether there is a valid debt. In most cases, the answer is yes. As a result, the creditor is entitled to be re-paid, per the contract you signed with them.

Do They Need A Judgment?

Except for the repossession of motor vehicles, in most cases the creditor will need a judgment in place in order to take your property. A judgment is not that difficult to obtain. As a result, most creditors are successful in procuring a judgment. One thing to keep in mind is that a judgment requires a lawsuit. If you have not been served a lawsuit, this means there is no judgment. Once a creditor files a lawsuit, you have a chance to defend against it. However, if the debt is valid there is no reason to spend time and energy fighting the judgment. One thing you might consider is responding to the Complaint (lawsuit) with an Answer, and ask for a hearing. At the hearing, you can ask the judge for an extension of time to consider filing bankruptcy or pay the creditor. This will buy you 30-90 days before a judgment is entered.

The Creditor Has A Judgment—What’s Next?

After a creditor receives a judgment against you, their next step is to try to enforce that judgment. First, the creditor must send you a Notice of Right to Claim Exemptions. It’s very important you complete this form. As a result of completing this form, you will disclose your assets and also invoke the protection of your State Exemptions. These exemptions protect you in Chapter 7, Chapter 13, and in a situation where a creditor is trying to take your property.

Second, the creditor will need to obtain a writ of execution. This is a court order from the Sheriff to take possession of property. Consequently, you may now be facing the loss of property. Communicating with the Sheriff’s office about your writ of execution is a very good idea. The Sheriff will understand if you tell them you are requesting some time to file bankruptcy—they may even tell you they will give you 30 days before executing on the writ of execution.

Lastly, the Sheriff will carry out the writ of execution to seize property to be turned over to the creditor in satisfaction of the debt. Or, the Sheriff will order the sale of property to liquidate it in order to pay the creditor.

Foreclosure Is Slightly Different

All of the above is true for foreclosure, except the process differs slightly. A mortgage creditor does not need a judgment against you to file foreclosure. They must simply show in court that you are behind on mortgage payments. You will receive notice of a preliminary foreclosure hearing. You should attend this hearing and ask for an extension to file bankruptcy or get caught up on your mortgage payments. Ultimately, if you don’t get caught up, the court will set a foreclosure date. You have until 10 days after the foreclosure sale date to file a Chapter 13 to save your house.

How Can You Stop A Creditor From Taking Your Property?

Bankruptcy is the most secure way to stop a creditor from taking your property. The filing of a bankruptcy invokes The Automatic Stay in bankruptcy. This prevents creditors from attempting to collect a debt in any manner. If necessary to save an asset, you can file an emergency bankruptcy petition with the court, and our firm can help with this.

What If The Creditor Is Threatening To Take My Car?

This video about Vehicle Repossession by attorney Ian Lyngklip gives great instruction on how to protect your car from a lender who is aggressively attempting to take it. Again, the filing of a bankruptcy will stop this process altogether and we’re here to help.

Speak With An Attorney Today

If you have questions about “Can creditors take your property?” please call us at 704.749.7747. Filing bankruptcy will dramatically change your life for the better—we’ve seen it over and over with our clients. You can also click for a FREE CASE EVALUATION and we will reach out to you today. We know you have choices. We hope you choose to Recover With Us.

File bankruptcy

Need A Raise? File Bankruptcy

Financial stress is a common form of anxiety and worry. In a recent CNBC article, it was reported that 30% of Americans say they are constantly stressed out about money. The stress is due not only to existing bills and debt, but also to the threat of unexpected expenses. If money is already tight, even the thought of a small unexpected expense can cause a great deal of anxiety.

Free Yourself From Financial Stress

There are two primary ways we can free ourselves from financial stress. First, we can make more money. While increasing your income is not an option for everyone, it does solve the financial problem for some Americans. So long as your expenses don’t increase with your income, you should be able to better manage your debt. For most of us, the idea of increased income is a good one, but the reality is we don’t have the option to do it or we would have done it long ago.

The second way to free yourself from financial stress is to reduce debt and expenses. If you’re like most clients we work with, you’ve already reduced your monthly expenses, and you now realize it’s the debt that is causing most of the stress. This is where filing a Chapter 7 or Chapter 13 bankruptcy can change everything.

Filing Bankruptcy Is Like Getting A Raise

It’s time to put the myths of bankruptcy aside and start focusing on the benefits of bankruptcy. Consider this: if you have $500 a month in debt payments you are making, your bankruptcy will eliminate those payments provided they are related to credit card debt, medical bills, or other unsecured debt. You were spending $500 of your post-tax money a month on those bills. Assuming you’re taxed at roughly 27%, that is roughly $700 a month in pay. When you calculate it annually, it comes to $8,400. Under this scenario, by filing bankruptcy, you effectively give yourself a $8,400 raise. For most Americans, a raise like that is a game changer. Add to that the fact that the debt is gone, and you realize financial relief is a few simple steps away.

But Isn’t Filing Bankruptcy Stressful?

No, filing bankruptcy is not stressful. We know our clients sometimes have an emotional response to the idea of filing bankruptcy. Once we’ve had an initial consultation and decided to make a decision that benefits us and our families, the idea of filing bankruptcy shows itself as a solution.  When we have a solution to our problems, we experience peace and joy—the opposite of stress and anxiety.

How Do I Get Started?

Getting started is so very easy. You simply make a phone call and discuss your options. The call will take about 20 minutes. After, you’ll be provided with a login and password where you can enter some specific information to help us determine if you qualify for Chapter 7. Most clients do, and those who do not can qualify for Chapter 13 in most cases. Either way, the debt goes away and peace is restored to your life.

Speak With A Bankruptcy Lawyer Today

Call us at 704.749.7747 or click for a FREE CASE EVALUATION and we will reach out to you. We know financial stress is tough. There is a solution, and we are proud to be part of it. We hope you choose to Recover With Us.

Emergency Bankruptcy Petition

If you need an emergency bankruptcy petition filed, you will need to move quickly. Using a bankruptcy lawyer is highly recommend, especially when filing an emergency petition. Bankruptcy can be a powerful tool to stop foreclosure, prevent judgments or collection of judgments, and discharge credit card debt, medical bills, and other debt. When you file an emergency bankruptcy petition, you usually use it to stop a foreclosure.

Chapter 13 Bankruptcy

If you’re using an emergency bankruptcy petition to stop a foreclosure, most likely you want to keep the house. If that’s the case, you’ll need to consider a Chapter 13 bankruptcy filing. A Chapter 13 allows you to stop the foreclosure, and propose a three to five year plan for repaying the mortgage payments you’ve missed. Provided your Chapter 13 plan is based on your disposable income each month, and proposes to pay back the full missed payments over the plan period, you should receive confirmation of your plan.

How Quickly Can I Get An Emergency Bankruptcy Filed?

Depending upon the situation, an emergency bankruptcy petition can be filed within a day or two. You will have to take the required pre-bankruptcy credit counseling course, which can be done on the computer and takes about an hour and a half. You’ll also have to pay a fee to your bankruptcy attorney in order to get the petition filed. Click here for a quick BANKRUPTCY FEE QUOTE from us.

Will An Emergency Bankruptcy Petition Stop Foreclosure?

Yes, the filing of an emergency bankruptcy petition will stop foreclosure. A notice of the filing will be sent to the county courthouse as well as the mortgage lender and their attorney. The automatic stay in bankruptcy will prevent the lender from moving forward with the foreclosure, provided your bankruptcy attorney follows the rules for Chapter 13. After the filing, provided your plan is confirmed and you continue to make on-time payments, you should continue moving in the direction of being paid and current on the mortgage.

Is There A Downside To Filing An Emergency Bankruptcy Petition?

The only downside to filing an emergency bankruptcy petition is the risk that you and your attorney were not able to be completely thorough in examining your financial picture prior to the filing. This could result in a Chapter 13 payment which is more than you can ultimately afford. This might also become an issue if you’ve made large transfers of assets in the months leading up to the emergency bankruptcy petition filing. This is not an issue for most clients, and the benefits of the emergency filing outweigh any potential downsides.

When Will My First Chapter 13 Payment Be Due?

The filing of your Chapter 13 case sets the payment due date going forward. If you file in the 15th of February, your first Chapter 13 payment will be due on or before the 15th of March. Each payment thereafter will also be due on the 15th.

Speak With A Bankruptcy Attorney Today

Are you facing a foreclosure and want to keep your home? An emergency bankruptcy petition filing may be the answer. Call us at 704.749.7747 or reach out for a FREE CASE EVALUATION and we will be in touch today. We know you have choices. We hope you choose to Recover With Us.

Do I make too much money for Chapter 7

How Does Bankruptcy Affect You?

While this question is general, we understand the concern. Most clients want to understand what it will be like during their bankruptcy, right after their bankruptcy, and a few years down the road from bankruptcy. This article is meant to address the question “How does bankruptcy affect you?” and we hope it helps. You can also read more specifically about how quickly you can file bankruptcy, or about Chapter 7 or Chapter 13.

How Are Things Right Now?

It’s important to put things into perspective when wondering how bankruptcy will affect you. It’s worthwhile to take stock of some of the experiences you’re having currently. They may include:

Creditors Pursuing You

No Savings For Emergencies

Inability To Save For The Future

Feeling Like You’re Failing Financially

Stress And Anxiety

All of these are very real concerns. Filing bankruptcy helps every single one of these concerns, from the moment you decide to file.

What Happens When I File Bankruptcy?

Creditor Calls Stop—Creditors are no longer allowed to contact you or pursue debt, in accordance with The Automatic Stay in bankruptcy. You get this protection from the day your bankruptcy lawyer files your case. We have addressed Credit Cards In Bankruptcy in a prior article.

Savings Increases—You immediately stop paying creditors with your hard-earned income, and can use those funds to make sure rent or mortgage is paid. You can make your car payments on time. Or, if there is extra money leftover, you can put it aside for savings.

You Feel Financially Healthy—With all of your unsecured debt gone, the immediate effect of bankruptcy is to free you from the burden of having overwhelming debt that you can’t keep up with over time.

Stress Melts Away—It’s amazing how stressful financial situations are. Without aggressive creditors calling you and reminding you every day that you owe them money, you’re free to focus on what’s important to you. The household budget is suddenly ‘balanced’ and you can afford necessities.

Credit Score—Immediately after filing bankruptcy, your credit score will drop due to the filing. Unless your credit was perfect before filing, you’ll find this dip in your credit score is a small price to pay for all of the benefits you receive upon filing bankruptcy. You can read more about your Credit Score In Bankruptcy as well.

How Does Bankruptcy Affect You One Year After Bankruptcy?

Credit Score—About a year after filing bankruptcy, your credit score will recover to where it was just before filing. From there, you can continue to re-build your credit quickly.

You’ll Receive Credit Card Offers—While most clients swear off credit cards upon filing bankruptcy, receiving offers for credit cards a year after filing bankruptcy is a sign of healthy credit. It means if you do decide to buy a car or need credit, it’s available for you. The reason for this is when you file bankruptcy you eliminate a lot of debt. From a creditor’s standpoint you become a great candidate for extending credit. Creditors also know you can’t file bankruptcy again for roughly eight years, so they count on you paying your monthly credit card bill if they offer you a credit card.

You’ll Have Opportunities To Save—With high monthly payments to creditors out of the way, you will find that each month you can set aside some money. This may be for savings, a future vacation, or some other necessity life brings your way. The peace of mind that comes with having some savings is priceless.

How Does Bankruptcy Affect You A Few Years After Bankruptcy?

Your Credit Score Fully Recovers—While bankruptcy may stay on your credit report for about 8 years, it doesn’t mean your credit score can’t recover much sooner than that. By making on time payments on mortgage, car, or other debt, you’ll accrue a good credit rating over time.

You Can Buy A House—Two years after filing bankruptcy, you’ll become eligible for some federal loan programs for purchasing a home. Four years after filing, you’ll become eligible for most private funding available on the marketplace from lenders like Quicken, Wells Fargo, or other mainstream mortgage providers.

You’ll Know You Made The Right Choice—With all of the financial options in front of you, and with all of your debt behind you, your decision to file bankruptcy will reveal itself as one of the best decisions you’ve made for yourself and your family.

Further Reading

How Does Bankruptcy Affect My Spouse?

Click to read over 100 Bankruptcy Blog Articles.

Speak With A Bankruptcy Lawyer Today

If you would like to get some questions answered, or take the next steps toward a painless bankruptcy filing, call us at 704.749.7747. You can also click for a FREE CASE EVALUATION and we’ll reach out to you. We know you have choices. We hope you choose to Recover With Us.

bankruptcy how long discharge

How Long Does Bankruptcy Take?

This article helps answer the question how long does bankruptcy take. The answer depends upon a few factors. Primarily, they are:

  • How quickly you can deliver documentation to your bankruptcy attorney
  • Whether you are choosing a Chapter 7 or a Chapter 13
  • Reasons which may exist to delay your filing

Delivering Documentation For Bankruptcy

Your ability to deliver documents can change the answer to the question “How long does bankruptcy take?” Most bankruptcy attorneys will accept documentation in electronic or paper format. Clients are usually pleasantly surprised at how easy it is to meet the documentation requirements, which shortens how long it takes to prepare to file for bankruptcy. While there may be more documentation required, generally you will need to provide:

  • Drivers License
  • Social Security Card
  • Vehicle Registration
  • Two years of tax returns
  • Six months of bank statements
  • Six months of pay stubs or proof of income

Once your bankruptcy attorney has this information, they can review it to be sure the bankruptcy petition they are drafting matches the activity on your accounts and tax returns.

Chapter 7 or Chapter 13

Chapter 7 bankruptcy results in a discharge roughly 120 days after the filing of the bankruptcy. Chapter 13 bankruptcy is a years-long bankruptcy where you make a monthly payment for 36 or 60 months. You receive a discharge after making your last payment. Your bankruptcy attorney will be able to help you decide between Chapter 7 and Chapter 13. Generally speaking, you must pass the Means Test to qualify for Chapter 7. Most clients who choose Chapter 13 do so because of one of the following:

  • Too much income
  • Too many assets
  • A desire to ‘catch up’ on a mortgage or car loan

After a free phone consultation, our office can typically predict for you whether you will need to file Chapter 7 or Chapter 13. From there, you can decide which route is best for you. If neither of the two options is appealing, we can always discuss the option of pursuing debt settlement instead of bankruptcy.

Reasons To Wait To File Bankruptcy

While the bankruptcy rules are very powerful in favor of the debtor, sometimes it makes sense to wait to file your bankruptcy. Usually, these waiting times are well worth it, and relatively easy to spot if you’ve been honest with your bankruptcy attorney. Because the bankruptcy rules look at a specific window of time regarding your financial activity, waiting an extra month or two to file can sometimes make the difference between a smooth and easy bankruptcy, or a rocky road. Here are a few reasons your bankruptcy attorney may recommend you wait to file:

  • Too much income in the past 6 months
  • A transfer to a friend or family member in the past year
  • A large payment to a creditor in the past 90 days
  • A new loan taken out in the past 90 days
  • Credit card use in the last 90 days beyond day to day purchases (Luxury items, etc.)

Hearing that you need to wait to file your bankruptcy may be frustrating. It certainly changes the answer to the question “How long does bankruptcy take?” if your attorney is recommending waiting, for the sole purpose of letting a financial item ‘drop off’ of your timeline. However, taking the advice of your bankruptcy attorney prior to filing will pay off for you in the end.

Speak With A Bankruptcy Attorney Today

We would love to help you get an answer to the question “How long does bankruptcy take?” A quick phone call with a bankruptcy attorney can put your mind at ease and help you understand the options. The path to financial recovery is usually very smooth. You’ll find most of your fears about bankruptcy are unfounded. We’d love to help you make a decision. You can reach us at 704-749-7747 or click for a FREE CONSULTATION and we’ll reach out quickly to make contact. We know you have choices. We hope you choose to Recover With Us.

Further Reading

How Does Bankruptcy Affect My Spouse?

Will The Bank Freeze My Bank Accounts In Bankruptcy?

student loans in bankruptcy

No, bankruptcy does not cover student loans. Well, at least bankruptcy does not “get rid of” student loans. This is the starting point in the discussion regarding student loans and bankruptcy. While that answer is not attractive, most clients find that filing a bankruptcy provides them with the relief they need from other debt such as credit card debt and medical debt. With those items out of the way, most clients find they can actually make their student loan payments.

The Exception To The Rule

Every rule has exceptions, and the same is true of student loans in bankruptcy. If you can prove that the payment of the student loans will pose an undue hardship on you and your dependents, you may be able to get your student loans discharged in bankruptcy. Courts use the Brunner test to determine if an undue hardship exists. It requires showing that: a) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans; b) additional circumstances exist indicating this state of affairs will persist during the remainder of the repayment period, and c) the debtor has made good faith efforts to repay the loans. Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987).

Debtors can expect a vigorous defense to be put on by attorneys representing the lenders in these situations, and the cost of litigating this issue combined with the low chance at success leads most individuals to simply accept that student loans aren’t going away in bankruptcy.

How Does Bankruptcy Help With Student Loans

There are a few ways in which bankruptcy does help with student loans. First, during the roughly 100 days your Chapter 7 is open with the court, your student loan lenders are not allowed to attempt to collect money from you. This is due to the Automatic Stay in bankruptcy. This provides a welcome break from student loans for a few months. You can expect collection attempts to continue after the Chapter 7 closes. In Chapter 13, you can elect to include your student loans in the Chapter 13 to be paid as unsecured debt. This amount is typically pennies on the dollar compared to what you’ve been paying. The downside of course is that during the Chapter 13 you will not make any progress toward the balance on the loans—however, we know that’s not the goal at the moment. The goal is some relief, and Chapter 13 can provide it in this manner.

What Are The Next Steps

Speak with a bankruptcy attorney about your student loans and other debts which are causing you to consider bankruptcy. Bankruptcy is a very powerful form of relief which immediately changes clients’ lives or the better. We are happy to discuss your options with you and there is no charge for the phone call—we’re happy to help. Call us at 704.749.7747 or click HERE to request a call from us. We know you have choices, we hope you choose to Recover With Us.

It is not uncommon for clients to miss a Chapter 13 payment for one reason or another. Just because you’re in a bankruptcy doesn’t mean life stops throwing you curve balls. Clients often have vehicle repairs that need to be done, or emergency visits to the doctor—any numerous financial surprises can get in the way of making a payment on time.

Modifying The Plan

Fortunately, the Chapter 13 bankruptcy court is interested in seeing people succeed. If you miss a payment, quite often the easy answer is to make the payment as soon as you can. If you miss multiple payments, typically the trustee will file a motion to dismiss or modify the plan. If this happens, you and your attorney will attend a short hearing where the trustee will propose a plan amendment.

Post-Modification

Once your plan is modified, quite often your plan payment amount stays the same. The trustee may extend your plan, or grant a moratorium on your missed payments, or adjust the base plan to accommodate the missed payments.

Call An Attorney

A Chapter 13 bankruptcy can provide powerful relief in a way that treats creditors fairly while allowing flexibility for the individual filing bankruptcy. If you have questions about Chapter 13 bankruptcy or bankruptcy in general, please call 704.749.7747 to speak with an attorney today.