Category Archives: Debt Listing

Is My Social Security Overpayment Dischargeable in Bankruptcy?

Posted on January 18, 2012 | Leave a comment

Overpayments of Social Security benefits are unsecured debts just like credit cards and medical bills, and they are therefore dischargeable in Chapter 7 and Chapter 13 bankruptcy in most cases, short of any finding of fraudulence in the acceptance of the payment by the recipient. In other words, so long as you did not accept the payments knowing that you were not entitled to it—or knowing that you were about to file for bankruptcy—the overpayment amount can be discharged in a Chapter 7 or Chapter 13 bankruptcy.

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Posted in Chapter 13, Debt Listing, Social Security Overpayment, Tax debt, Tax Returns and Bankruptcy

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How Can a Chapter 13 Bankruptcy Help Me Pay Down my Student Loans?

Posted on September 27, 2011 | Leave a comment

I have addressed the high bar to the discharge of student loan debt in bankruptcy on this blog in earlier posts. It remains true that student loans are very largely not dischargeable in bankruptcy. However, it is not true that bankruptcy cannot assist in managing or even paying down student loan debt.

A Chapter 13 bankruptcy, on the other hand, although it will not “discharge” non-dischargeable student loan debt any more than a Chapter 7 would, can be useful in obtaining relief from student loan payments for a lengthier period of time and managing the eventual pay-down of the debt balance.

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Posted in Chapter 13, Debt Listing, Student Loans

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Is Income Tax Debt Dischargeable in Bankruptcy?

Posted on August 9, 2011 | 2 Comments

Income tax debt is, under some circumstances, dischargeable in Chapter 7 bankruptcy. Even outside of those circumstances, it is at least “treatable” in a Chapter 13 bankruptcy in a manner that can be a much better deal for the taxpayer than any of the payment schemes offered by the IRS.

Income tax debt, whether Federal or state income tax debt, is, for starters, classified as a “priority” claim by the Bankruptcy Code. In a Chapter 7 bankruptcy context, that means that, unless the debt meets certain criteria, it is non-dischargeable and the bankruptcy will not affect the filing debtor’s obligation to pay it. In a Chapter 13 bankruptcy context, “priority” classification means that the debt must be paid in its entirety within the Chapter 13 bankruptcy payment plan (60 months maximum).

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Posted in Chapter 13, Chapter 7, Debt Listing, Tax debt, Tax Returns and Bankruptcy, Uncategorized

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Can I Discharge a Personal Injury Judgment in Bankruptcy?

Posted on May 5, 2011 | Leave a comment

Personal injury lawsuits, depending upon the nature of the claim, are generally not dischargeable in bankruptcy. A claim or a judgment for an injury that is the result of an “intentional” tort is not dischargeability in bankruptcy. (An intentional tort is a civil offense committed with the intent of causing physical, mental, or financial harm to another person.)

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Posted in Bankruptcy Laws, Civil Judgments and Bankruptcy, Debt Listing, Judicial Decisions

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Can I Discharge in Bankruptcy a Settlement of a Lawsuit that Alleged Fraud?

Posted on April 14, 2011 | Leave a comment

The Bankruptcy Code states that a debt is not dischargeable in Chapter 7 or Chapter 13 bankruptcy if it is owed for money obtained through fraud. The US Supreme court has upheld even the non-dischargeability of a settlement of a lawsuit in which a complaint of fraud is alleged as owed “for money obtained through fraud.” In short, although you must list all debts owed in your bankruptcy petition when you file it, some of those debts may not actually be discharged by the bankrutpcy, and “fraudence-based” debts are one of those types.

However, the question remains: what is a debt obtained through fraud?

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Posted in Bankruptcy Laws, Bankruptcy Process, Business Debt, Debt Listing, Judicial Decisions, Michigan, Uncategorized

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What Is a Chapter 13 Bankruptcy Plan?

Posted on December 21, 2010 | 5 Comments

What is the Chapter 13 Plan itself? Very simply, it is list of debts to be paid in a certain order, according to a certain timeline, and, in the case of the unsecured creditors at the bottom of the priority order, to a certain percentage of what was originally owed to them—anywhere from 0% to 100%. 

The priority order of debts to be paid is fixed by the Bankruptcy Code: 

  1. “Administrative” Costs: These are the Trustee’s percentage earned of the total paid into the plan by the debtor (currently around 8% in the Eastern District of Michigan), as well as the balance of Attorney’s fees not paid prior to filing. Unlike in a Chapter 7 bankruptcy, the majority of Attorney’s fees are paid through the Plan rather than up-front, and these fees are highly scrutinized by the Bankruptcy Court.  
  2. “Secured” Debts, such as home loans and car loans, come next.  
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Posted in Bankruptcy Laws, Bankruptcy Process, Chapter 13, Debt Listing, Home Mortgages and Bankruptcy, Michigan

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What Is the Automatic Stay and How Does it Protect Debtors in Chapter 7 and 13 Bankruptcy?

Posted on April 13, 2010 | 1 Comment

In several previous entries, I’ve touched upon this thing called the Automatic Stay in the Chapter 7 and Chapter 13 bankruptcy process, but I haven’t fully described what it is and what it means to Detroit, Michigan-area residents considering filing for bankruptcy.

The Automatic Stay is one of the primary and most immediate benefits of filing for bankruptcy. In short, it is a stay against nearly all collection attempts by creditors upon individuals who filed a Chapter 7 or Chapter 13 bankruptcy petition, and it is enforced automatically upon the filing of those petitions. In other words, the moment that a personal bankruptcy petition is filed, it becomes a violation of Federal law under the § 362 of the US Bankruptcy Code for creditors of that filing individual to do anything that would qualify as an attempt to collect their debt, including phone-calls, letters, foreclosures, reposssessions of property, set-offs of funds, perfection of liens, garnishments, civil collection lawsuits, etc. Some creditors are not barred by the Automatic Stay, such as those collecting for past-due child-support and for criminal penalties, but, otherwise, every creditor that you owe money to is barred from trying to collect it while the Automatic Stay is in place.

The Automatic Stay lasts from the filing of the petition through the granting of the discharge, roughly a 3.5 to 4-month period. Thus, it is not a permanent stay against collection attempts, but it is generally sufficient to keep the creditors off of filing individuals’ backs while the bankruptcy petition is in process. For most unsecured debts, such as credit-cards and medical bills, it is effectively permanent as these sorts of debts in a Chapter 7, at least, are discharged at the end of the period virtually without fail.

While the Automatic Stay is in effect, any creditor who wishes to proceed to collect from you must first file a motion with the bankruptcy court to lift the Automatic Stay. This can happen in various circumstances, most often with regard to secured creditors who would like to repossess or foreclose upon the collateral securing their loan to you. Short of filing a motion of this sort and receiving a favorable outcome from the court, commercial creditors are unable to proceed against you during your bankruptcy process.

However, the Automatic Stay is not magic: creditors have to know that you have filed for bankruptcy in order to abide by it. Thus, it is crucial that you ensure that your bankruptcy attorney has each and every creditor that you owe any amount of money to listed completely and accurately in the petition. If a creditor is listed in the petition, that creditor will receive a notice from the bankruptcy court upon the filing of your petition that alerts them to the fact that the Automatic Stay is now in effect.

For that reason, it is vital that you work closely with your attorney and work hard to provide him or her with all of the information needed to fully complete your petition.

If you are Detroit-area or southeast Michigan-area resident and are considering filing for bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy Process, Chapter 13, Chapter 7, Debt Listing

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What Do the New Credit Card Laws Mean to Detroit Consumers?

Posted on April 3, 2010 | Leave a comment

At the end of February, some key changes to the way that the credit card industry bills and charges interest went into effect as part of new legislation signed by President Obama.  Although touted by the President and by supporters of legislation in Congress as a significant step forward in protecting consumers, this legislation is, in fact, a very minor step forward from the previous credit card billing and financing status quo.

There are, to be sure, some improvements worth noting in the new legislation—but not without some accompany areas in which there is a distinct lack of improvement:

  • Credit card issuers can no longer raise interest rates on existing balances. This is why your credit card issuer may have raised your interest rates earlier this year, regardless of your payment history. They were slipping one in while they still could, or, in some cases, canceling the card. What the legislation did not do is set a rate ceiling for new customers or for debt incurred for future purchases.
  • Credit card issuers can no longer impose a fee upon you when you exceed your credit-limit. However, card issuers can still charge all kinds of other fees, including annual and “inactivity” fees.
  • Card issuers are now required to apply your payments to the part of your balance with the highest interest-rate first. Previously, if you had a cash advance balance on your card with a high interest rate, that would be the last place the card issuer would apply your latest payment. Now, it is required to be the first. However, some bad news if you are among the many paying only the minimum payment each month: when you make only the minimum monthly payment,  card issuers are still inexplicably allowed to apply this payment to the lowest rate debt on the card!
  • Your due-date must now be the same date every month, you must receive your bill at least 21 days before the bill is due, and a practice known as “double-cycle billing,” in which the card issuer uses an average daily balance over 2 months to calculate your interest rate, is now prohibited. You may have also seen on your most recent statement or two a disclosure revealing the amount of time it would take you to pay off the balance making only the minimum monthly payment and how much you’d need to pay monthly to eliminate your debt within 3 years.
  • Card issuers are now required to give you 45 days’ notice before making certain account-changes, such as interest rate hikes, charging allowed fees, and other things. However, card issuers are still allowed to close your account or lower your credit-limit for any or no reason at all without any advance notice.

Source: USA Today.

In short, the legislation does take some positive steps forward, but, in my opinion, it doesn’t go far enough in protecting consumers from credit card issuers’ most egregious practices. The problem with “halfway” legislation of this sort, in my opinion, is that it allows the President and legislators to claim that “signifcant reform” has taken place, when, really, a few of the practices of the credit card issuers have simply been modified slightly toward the betterment of consumers. When the politicians involved can successfully make that claim, it is unlikely that further reform will come our way anytime soon.

While it is important that card issuers are now required to give you the information you need to be a better consumer and to make sound financial decisions, what is plain is that, when you click that link on your online statement that tells you how long it will take you to pay off your balance, you will see that your debt is not going anywhere anytime soon as a result of these new laws.

However, other solutions remain viable. A Chapter 13 bankruptcy can still force card lenders and other debt purveyors into a court-ordered payment plan, and a Chapter 7 bankruptcy can still liquidate most debts entirely. If your debt-load is keeping you from caring for your family, from keeping a roof over your head, or from getting to the place you need to be in life, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation so that I can help you find a legitimate path toward a financially sound future.

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Posted in Bankruptcy Laws, Chapter 13, Chapter 7, Debt Listing, Michigan

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What Happens if I Forget to List a Creditor in My Bankruptcy Petition?

Posted on February 16, 2010 | Leave a comment

When you are filing for bankruptcy, it’s all too easy to forget to list a creditor or to discover, after the petition has been filed, a creditor that you did not even know existed. When debts are bought and sold by creditors and collection agencies faster than a credit report can often account for the exchanges, it’s a commonplace phenomenon for a filing debtor to receive, after filing the petition, a collection letter from one of the seemingly endless fly-by-night collection agencies for a debt that the debtor did not know had changed hands. (As a consumer bankruptcy attorney working in a specific geographic area, the Detroit area of southeast Michigan, I am often amazed at the sheer number of these companies that come and go like schools of fish … Outside of a few larger agencies, each petition I file brings a slew of collection agencies I have never seen before and will likely never see again!)

Other times, leaving a creditor off of a listing is just a matter of simple error. No big deal. It happens. I try to avoid such error with my clients by working with them to obtain their latest credit report prior to filing their petitions. Most of the time, this nets all of the creditors swimming around them, and it will usually ensure that at least the original debts owed by my clients are successfully listed in the petition, even if a debt happens to have been recently sold off to some random collection agency.

So long as the error or omission is caught early enough in the roughly 4 month bankruptcy process, it is a simple matter to add a missed or missing creditor to a filed petition. The court charges a $23 fee for such amendments, but it is worth the cost. Although, in a Chapter 7, a non-listed debt will still be discharged, if the creditor has a claim against the debtor for fraud, theft, some willful or malicious act against the filing debtor, or if the creditor would have received funds from the filing debtor’s bankruptcy estate if they had been listed, that debt may not be discharged.

Additionally, it goes without saying that all debts and creditors must be disclosed. When you file a bankruptcy petition, your signature on the petition in several places indicates that you have completely and accurately disclosed all of your assets and liabilities. At the 341 Meeting of Creditors, about halfway through the bankruptcy process, you likewise will swear under oath that you have completely disclosed all of your assets and liabilities. A missing creditor that you are aware of or should have been aware of means that this cannot be true.

It is, thus, very important to work closely—and patiently—with your attorney when filing bankruptcy to ensure that all of the necessary information (especially creditors!) gets included. If your attorney works as I and most other bankruptcy attorneys that I am acquainted with do, you will be required to fill out a lengthy questionnaire at the beginning of your bankruptcy process from which your attorney will create your bankruptcy petition. It is not fun to fill out these questionnaires, but it is extremely necessary. Bankruptcy, like every legal process, is only worth doing if it is done right. It is always worth taking the time and effort up front to ensure that your bankruptcy filing is completely accurate in every way.

If you are a Michigan resident and are considering filing for bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy, Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Debt Listing, Michigan, What Do I Need to File?

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Am I Responsible for My New Spouse’s Debts?

Posted on February 9, 2010 | 1 Comment

This question is a very common one, and it is, unfortunately, often the basis for uncomfortable discussions between those wishing to marry.

Much of the confusion regarding the answer is, I think, a result of media reports of the divorces of the rich and famous, many of whom reside in California, a community property state. My state, Michigan, is not a community property state … For the purposes of divorce, it is what is known as an “equitable distribution state.” That is, couples who divorce are entitled to a distribution of the property that they accumulated through their marriage according to the contribution they made to that property. It is not an even 50% split by any means, though that can, in some circumstances, be the result. All of that discussion, however, concerns the question of property—not debt.

When it comes to bankruptcy and to concerns about “marrying into debt,” the equation is more cut-and-dry: the answer to the question of whether your are responsible for your new spouse’s debt-load is NO.  You are not automatically made party to the contracts of sale and credit your new spouse has agreed to be party to by virtue of your marriage. There is no mechanism in the law that automatically adds your name to any contract to which you have not agreed to be personally liable.  While the civil act of marriage does, depending on the state that you live in, potentially entitle you to some portion of your new spouse’s property either in the case of divorce or death, a marriage does not have any legal effect with regard to each participating spouse’s personal debt accrued prior to the marriage.

It is always a good idea, of course, to discuss your financial liabilities with a prospective spouse prior to marriage so that, as a couple, you can adequately plan for the lifestyle you wish to achieve together. Further, one may consider it a matter of personal ethics or morality to “warn” a prospective spouse if your debt-load is high. However, regardless of the outcome of that necessary discussion, unless you co-sign for loans or credit-cards after the marriage is completed, you will NOT “marry” each other’s debt.

If you are a resident of Detroit or southeast Michigan and have questions about debt and bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy Planning, Business Debt, Debt Listing, Marriage and Bankruptcy

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