Posted by Kevin on September 19, 2019 under Bankruptcy Blog | 
Bankruptcy can prevent future judgment liens. It usually stops a lawsuit from turning into a judgment, and then a judgment lien on your home.
Judgment Liens Are Dangerous
Our last blog post was about how filing bankruptcy can sometimes remove, or “avoid,” a judgment lien from your home. This is a great potential benefit of bankruptcy if a judgment lien has already been recorded.
But it is often much better to file a bankruptcy case before a judgment lien hits your home’s title. Here are a few of the practical reasons why:
- You have to meet certain strict conditions to be able to avoid the judgment lien. If you don’t meet them, even bankruptcy won’t get rid of that lien on your home. You may have to pay all or part of the debt in spite of filing bankruptcy.
- Even if you succeed in avoiding the lien in your bankruptcy case, it is an extra step that can cost you more. And the cost can go up substantially if the creditor fights your lawyer’s efforts to avoid the lien. Besides higher lawyer fees, you may have to pay for a home appraisal and for the court testimony of the appraiser.
- The existence of a judgment lien adds uncertainty, and thus some extra anxiety, to your bankruptcy process. The goal of bankruptcy is relief. So it’s better to prevent a judgment lien from hitting your home than messing with it after it has hit.
Judgment Liens Are Preventable
Filing bankruptcy usually stops an ongoing lawsuit against you from turning into a judgment. Bankruptcy’s “automatic stay” immediately stops “the… continuation… of a judicial, administrative, or other action or proceeding against the debtor… .”
Filing bankruptcy also usually prevents future lawsuits against you from being filed much less turning into judgments. The automatic stay” immediately stops “the commencement… of a judicial, administrative, or other action or proceeding against the debtor… .” Section 362(a)(1) of the U.S. Bankruptcy Code.
The exceptions are debts that cannot be written off (“discharged”) in bankruptcy, such as certain ones based on fraud, income taxes, child or spousal support, most student loan debt and criminal behavior. But bankruptcy does discharge most debts. So filing bankruptcy will stop ongoing and future lawsuits on most of your debts. And it will prevent those debts from turning into dangerous judgment liens on your home.
The Timing Can Be Crucial
You know when things are going south financially. You are making no more than minimum payments on your credit cards. You miss payments here and there but convince yourself that you will make it up next month. But you don’t make it up. Debt collectors are calling daily. And the dunning letters are also coming in. You could bury your head in the sand and that will lead to lawsuits, judgments, and judgment liens on your home.
Most times, it is best to be proactive. At the very least, you should be seeking out an experienced bankruptcy attorney to analyze your situation and let you know whether bankruptcy can be an effective tool to deal with your creditors.
Posted by Kevin on September 14, 2019 under Bankruptcy Blog |
Neglecting Bankruptcy as an Option
If you have a debt that you have heard cannot be discharged (legally written off), you may not be seriously considering bankruptcy as an option. You probably have not seen a bankruptcy attorney. That could well be a mistake.
Getting the Law Right
But whether or not a specific debt can be discharged, you would be wise to get legal advice about it, for the following 4 reasons:
1. Some debts that can’t be discharged now perhaps can be in the future. Almost all income taxes can be discharged after a series of conditions have been met, which mostly just involve the passage of enough time. So your attorney can create a game plan for you using the tax timing rules to discharge as much tax debt as possible. Timing can also be important with student loans, especially if you have a worsening medical condition or are getting close to retirement age, making for a better argument of “undue hardship.”
2. Even if you can’t discharge a particular debt, bankruptcy can permanently solve an aggressive collection problem. Often your biggest problem is how aggressively a debt is being collected. For example, you may want to pay your back child support (which is not dischargeable) but the state support enforcement agency is threatening to suspend your driver’s and/or occupational license. The filing of a bankruptcy triggers the automatic stay which will stop collection efforts during the term of the bankruptcy or until the Court vacates the stay for just cause. A Chapter 13 case then will allow you the time (3 to 5 years) to catch up on the back support payments based on your budget.
3. Bankruptcy can stop the adding of interest, penalties, and other costs, allowing you to pay off a debt much faster. Unpaid income taxes and certain other kinds of debts take more time to pay off because a part of each payment goes to the ongoing interest and penalties. Certain tax penalties in particular can be large. Most of these additions to the debt are stopped by a Chapter 13 filing, allowing you to become debt-free sooner and by paying less money.
4. Bankruptcy allows you to focus on paying off the debt(s) that you can’t discharge by discharging those you can. You may have a debt or two that can’t be discharged, but you likely also owe a set of debts that can be. Even if bankruptcy can’t solve your entire debt problem by simply discharging all you debts, as long as you can discharge most of your debts that would likely make your remaining debt problem much more manageable.
Conclusion
So don’t let the fact that you’ve heard that you have a debt or two that can’t be discharged in bankruptcy stop you from getting legal advice about it. Your financial life could well still be greatly improved through one of the bankruptcy options.
Posted by Kevin on September 1, 2019 under Bankruptcy Blog |
First, let’s review the different types of debts in bankruptcy.
Secured debts are collateralized usually by your home, your car or your truck, maybe your furniture and appliances. Priority debts are ones that are usually not secured but are favored in various ways in the bankruptcy law. For most consumer debtors, they include child and spousal support, and certain taxes.
The remaining debts are called general unsecured debts. Think credit cards and medical bills. What do all these debts have in common-no collateral attached to these debts and not given a favored (priority) position under the law.
In most Chapter 7 bankruptcies, the vast majority of debts are general unsecured debts. In Chapter 7 bankruptcy, most general unsecured debts are legally, permanently written off. The legal term is “discharged”. That means that once they are discharged—usually about 3-4 months after your case is filed—the creditors can take absolutely no steps to collect those debts.
The only way general unsecured debts can be paid anything is if either 1) the debt is NOT dischargeable or 2) it is paid (in part or in full) through an asset distribution in your Chapter 7 case.
1) “Dischargeability”
A creditor can dispute your ability to get a discharge of your debt. In the rare case that the discharge of one of your debts is challenged, you may have to pay that particular debt. That depends on whether the creditor is able to establish that the facts fit within the narrow grounds for an exception to dischargeability. This usually involving allegations of fraud, misrepresentation or other similar bad behavior on your part. If the creditor fails to establish the necessary grounds, the debt is discharged.
There are also some general unsecured debts that are not discharged unless you convince the court that they should be, such as student loans. The grounds for discharging student loans are quite difficult to establish. Check /http://studentdebtnj.com/ for more detailed information relating to your student loans.
2) Asset Distribution
In order for a debtor to get a fresh start, the Bankruptcy Code allows a debtor to exempt certain property. That means you keep that property. If everything you own is exempt, or protected, then your Chapter 7 trustee will not take any of your assets from you. This is what usually happens—you’ll hear it referred to as a “no asset” case. But if the trustee DOES take possession of any of your assets for distribution to your creditors—an “asset case”— your “general unsecured creditors” may receive some of it. The trustee must first pay off any of your priority debts, as well as pay the trustee’s own fees and costs. Whatever remains goes to the unsecured creditors on a pro rata basis.
Conclusion
In most Chapter 7 cases your general unsecured debts will all be discharged and, most of the time, general unsecured creditors will receive nothing from you. Rarely, a creditor may challenge the discharge of its debt. If the creditor is successful, you will still owe that debt after the close of the bankruptcy. And if you have an “asset case,” the trustee may pay a part, or in extremely rare cases, all of the general unsecured debts, but only after paying all priority debts and his or her fees and costs.
