Bankruptcy and College Savings

When filing for Chapter 7 bankruptcy, the thing that concerns most people is how much of their assets they can save. Besides the primary home and vehicle, there are other assets of great importance to debtors. One such asset is college savings. If you have some form of college savings like a 529 Plan or an Educational IRA, then you may be wondering if this asset would be protected from seizure in a Chapter 13 bankruptcy.

According to the bankruptcy code, whether a college fund is liable to seizure by the bankruptcy court depends on the time when the contribution was made. This means some part of the college fund may be liable to seizure while other parts may not. The bankruptcy code stipulates that if an amount of contribution was made at least 720 days prior to your bankruptcy filing, then this amount cannot be seized by the bankruptcy trustee.

But if an amount of contribution was made between 365 and 720 days before filing for bankruptcy, then it may be partially seized by the bankruptcy trustee to repay your creditors. And if a contribution was made less than 365 days before the day your file for bankruptcy, then the bankruptcy trustee has the right to seize it.

Suppose you have made a $20,000 contribution to your Educational IRA on August 30, 2008, another $10,000 on August 30, 2010 and finally $30,000 on August 30, 2011. And suppose you file a bankruptcy petition today, July 31, 2012. The law states that the $20,000 is not subject to seizure, while the $10,000 is partially protected and the $30,000 is not protected and thus subject to seizure.

If you wish to file for bankruptcy protection to save your college funds (or any other asset), call us at (813) 200 4133 for a free consultation.

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    Bankruptcy and Tax Debt

    Most people would tell you if you owe on your income taxes, your tax debt cannot be discharged by filing a bankruptcy petition. While this is generally true, there are exceptions to the case. Then there is the other matter of which type of bankruptcy would be more suitable for eliminating tax debt.

    Tax debt is not eligible for discharge through bankruptcy unless certain criteria are met. Firstly, the tax debt must have been assessed by the IRS within 240 days before you filed for bankruptcy. However, this time span may be changed if you had filed an offer in compromise, the IRS suspended collection activity or there was a previous bankruptcy filed by you.

    Secondly, your tax debt is dischargeable contingent upon you filing taxes up-to-date. This means you must have been filing your taxes even if you could not pay some or all of them.  However, if you have been delinquent in your tax filing for two or more years prior to filing for bankruptcy, then your tax debt cannot be discharged by bankruptcy.

    Thirdly, the tax debt you wish to discharge must be at least 3 years old at the time of filing for bankruptcy.

    And finally, all your previous tax submissions up to the point of filing for bankruptcy must have been correct and true. If you have committed tax fraud or tax evasion, then your tax debt would not qualify to be discharged.

    Generally, Chapter 7 bankruptcy is the more suitable type of bankruptcy to file to discharge tax debt. This is because only under Chapter 7 bankruptcy is debt discharged. Under the other type of bankruptcy, namely Chapter 13, your debts will be paid off over a period of time following a payment plan.

    If your tax debt fulfills the above criteria, bankruptcy may stop the IRS from garnishing your wages or seizing what money you have in your bank account. But there are some tax related debts that may not be dischargeable. For example, if the IRS has filed a tax lien on your property, then this tax debt may not be dischargeable through bankruptcy.

    If you decide to file for Chapter 13 bankruptcy, then if your tax debt fulfills the required criteria, you may be required to pay all or allowed to pay a portion of your tax debt.

    To discuss if bankruptcy is the best option for you to eliminate your tax debts, call us at (813) 200 4133 for a free consultation.

    you if you owe on your income taxes, your tax debt cannot be discharged by filing a bankruptcy petition. While this is generally true, there are exceptions to the case. Then there is the other matter of which type of bankruptcy would be more suitable for eliminating tax debt.

    Tax debt is not eligible for discharge through bankruptcy unless certain criteria are met. Firstly, the tax debt must have been assessed by the IRS within 240 days before you filed for bankruptcy. However, this time span may be changed if you had filed an offer in compromise, the IRS suspended collection activity or there was a previous bankruptcy filed by you.

    Secondly, your tax debt is dischargeable contingent upon you filing taxes up-to-date. This means you must have been filing your taxes even if you could not pay some or all of them.  However, if you have been delinquent in your tax filing for two or more years prior to filing for bankruptcy, then your tax debt cannot be discharged by bankruptcy.
    Thirdly, the tax debt you wish to discharge must be at least 3 years old at the time of filing for bankruptcy.

    And finally, all your previous tax submissions up to the point of filing for bankruptcy must have been correct and true. If you have committed tax fraud or tax evasion, then your tax debt would not qualify to be discharged.

    Generally, Chapter 7 bankruptcy is the more suitable type of bankruptcy to file to discharge tax debt. This is because only under Chapter 7 bankruptcy is debt discharged. Under the other type of bankruptcy, namely Chapter 13, your debts will be paid off over a period of time following a payment plan.

    If your tax debt fulfills the above criteria, bankruptcy may stop the IRS from garnishing your wages or seizing what money you have in your bank account. But there are some tax related debts that may not be dischargeable. For example, if the IRS has filed a tax lien on your property, then this tax debt may not be dischargeable through bankruptcy.

    If you decide to file for Chapter 13 bankruptcy, then if your tax debt fulfills the required criteria, you may be required to pay all or allowed to pay a portion of your tax debt.

    To discuss if bankruptcy is the best option for you to eliminate your tax debts, call us at (813) 200 4133 for a free consultation.

     

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      Deciding to File a Bankruptcy Petition

      Filing for bankruptcy is your right under the bankruptcy code. It is the legal way to get yourself out of crippling debt and start anew financially. Nevertheless, the decision to file for bankruptcy should not be taken lightly as it has wide implications for your life. In this article, I would like to help you decide if filing a bankruptcy petition is the right thing to do for you. The way I see it, there are some indications that bankruptcy may be the most viable choice.

      You cannot seem to reduce your debts in any significant way
      No matter how hard you try, you are not making a dent in your debt situation. It seems like all your savings and current salary is insufficient to pay off any significant part of your debts. If you are caught in such a situation, it indicates that filing a bankruptcy petition may be the best option for you. Bankruptcy does what you personally cannot do – it puts a stop to all creditor actions against you, it consolidates your debts for you to repay in manageable portions, it helps you pay off your debts through liquidation of non-essential assets etc. There is one type of bankruptcy that is suitable for you and you should discuss it with an experienced bankruptcy attorney.

      If you wish to discuss bankruptcy as an option, call us at (813) 200 4133 for a free consultation.

      Your income has hit a ceiling
      The logical way to reduce your debt would be to pay more. To pay more, you would have to earn more. But if your level of income has hit the maximum then it is highly unlikely that you can reduce your debt by paying more. And if your income does not increase more than the rate of inflation over the next 3 to 5 years, then you would not have any more money to pump into settling your debts. In such a case, you would be better off filing for bankruptcy. Under chapter 13 bankruptcy, your debts can be repaid through a payment plan of between 3 and 5 years.

      So do not wait for the ever-elusive income spike. Chances are it may not come or it may not be enough. You should consider bankruptcy as a viable option.

      Your debt problem is affecting other areas of your life
      Financial problems will inevitably have an effect on other areas of life like your marriage, your health and your relationships. If your debts are causing you stress that is impairing your health and damaging your relationships with your loved ones, you should consider bankruptcy. Bankruptcy can help relieve you of the stress that might be detrimental to other areas of your life.

      So stop worrying about your debt problems and let bankruptcy bring you the emotional relief you deserve. Call us at (813) 200 4133 for a free consultation.

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        Bankruptcy and Consolidation of Loans if Jobless

        Consolidation of loans means obtaining a new loan that repays all your current loans so that you pay only one creditor instead of multiple ones. Often, the incentive to consolidate loans is a lower interest rate besides the convenience of dealing with only one creditor. While this sounds like a practical idea, consolidating your loans may become rather complicated when you are out of a job. Without a steady source of income, you would be hard pressed to secure a new loan.

        Most lenders would require evidence of a steady source of income before granting you a loan. Without a steady source of income, you may be able to use collateral in other forms (such as savings accounts) or rely on unemployment benefits to secure a loan. If you have something of value to use as collateral your chances of obtaining a new loan would be higher. But if you are drawing only unemployment benefits, it may not be enough to convince a lender to offer you a loan as most lenders see unemployment benefits as something temporary.

        Another form of debt consolidation is transferring credit card balances to another credit card that charges a lower interest rate. This would be a wise thing to do but again, credit card companies must be convinced that you can repay your debt before they will allow you to transfer your credit card balances. But if you have been consistently servicing your debts and have a good credit rating, the credit card companies may offer you a new card on lower interest and invite you to transfer your current credit card debts to this new card.

        If you cannot consolidate your debt and cannot meet your repayment obligations because you have lost your job, you should consider filing a bankruptcy petition. Bankruptcy is one way to wipe your slate clean of all unsecured debts like credit card balances and medical bills according to the bankruptcy code.

        If you wish to discuss how bankruptcy can save you from your financial problems, call us at (813) 200 4133 for a free consultation.

         

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          How Bankruptcy Affects Wage Garnishment

          Wage garnishment is one way creditors get their money back from you. A wage garnishment is carried out when your creditor obtains a court order that compels your wages to be garnished. In a wage garnishment, your wages are garnished (i.e. deducted) by a certain amount every month to repay the outstanding debt that is owed to your creditor(s). If you are subject to a wage garnishment or about to be subjected to one, the best way to deal with it is to file a bankruptcy petition.

          Under the bankruptcy code, once your bankruptcy is confirmed, an automatic stay comes into immediate effect. The automatic stay would put a stop to all collection efforts by your creditors and this includes wage garnishment. This means all wage garnishment would have to cease once you file for bankruptcy. In some cases, when you file for bankruptcy, you may be able to collect back the wages that have been garnished. The only way a creditor can continue garnishing your wages would be to apply to the court to grant a removal of the automatic stay.

          But there are some exceptions to this rule. Bankruptcy cannot stop wage garnishment if your wages are garnished to pay for child support or alimony which the bankruptcy court considers priority debts. Other than these debts, all other debts that are paid by wage garnishment are not considered priority debts which means bankruptcy can stop wage garnishment used to repay them.

          Usually automatic stay is maintained throughout the course of your bankruptcy proceedings until your debts are paid off or discharged. Thus, the debt paid through wage garnishment would be settled or discharged by the end of your bankruptcy. If your bankruptcy is dismissed for any reason, then the automatic stay would cease and your creditor may garnish your wages again.

          When you file for bankruptcy, you may be able to collect back some of the wages garnished if your creditor has garnished more than he should or the amount of wages garnished exceeds the limit set by your state’s laws. In any case, once you file for bankruptcy, you can inform your employer not to garnish your wages anymore because of the automatic stay.

          If you wish to find out more about how bankruptcy can stop your wages from being garnished, call us at (813) 200 4133 for a free consultation.

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            Creditors with Zero Balance in Bankruptcy

            When you file a bankruptcy petition, you are required to submit a complete list of all your creditors. This is to facilitate the repayment of your debts either by liquidating your non-exempt assets under Chapter 7 or under a 3 to 5 year payment plan under Chapter 13 bankruptcy. At the same time, it is not uncommon to have creditors with zero balances i.e. creditors to whom you do not owe anything at the point of filing your bankruptcy petition but with whom you still have an account. Do these creditors still count as creditors and should they be listed along with all your other creditors?

            The fact is the bankruptcy code does not specify what you are required to do in such a case. But as a bankruptcy attorney who has represented thousands of cases, I would strongly recommend that you DO list such a creditor even though you do not owe anything at the point of filing. There are some practical reasons why it is to your advantage to list these creditors although by law you are not required to.
            Firstly, although you do not owe anything at the time of filing bankruptcy, your account may incur some charges during the bankruptcy process. So if you did not list this creditor, bankruptcy will not protect you. This creditor will not be subject to automatic stay and can legally hound you for payment.

            Secondly, once you file a bankruptcy petition, the creditors you listed will be informed and as a result, the creditor you did not include in the list will likely hear about your bankruptcy. And when he or she discovers that you are a bankrupt, this may cause him to aggressively collect any charges you may incur during the time of your bankruptcy. But even if you do not incur any unexpected charges during your bankruptcy, your unlisted creditor would likely close your account even if you have been a good paymaster all the while. This means you would lose all associated privileges from your account.

            One simple example is a credit card with a zero balance. If your credit card issue closes your account, you would not be able to use it anymore even after you exit bankruptcy. Granted, this eventuality may take place even if you list your creditor with whom you have a zero balance. This is why I always advise my clients to contact their creditors BEFORE they file for bankruptcy and ask them if they can keep their credit cards. Some credit card issuers may allow you to do so but it is up to you to convince them.

            Finally, you should list creditors even if you owe them nothing because if you do not and later when the bankruptcy process has begun and you decide to add such a creditor, you will be charged an extra fee for the inclusion.
            If you wish to file a bankruptcy petition, call us at (813) 200 4133 for a free consultation.

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              Know your Rights as a Credit Card Holder

              Most people own at least one credit card. One of the most common debts I come across in bankruptcy cases is credit card debt. Most times, the reason for the soaring credit card balance is unbridled spending but there are times when the reason could also include not knowing your rights as a credit card holder. Here are some rights you have as a credit card holder that most people are not aware of.

              If your credit card is lost or stolen, you are only liable for up to $50 of debt if your credit card has been charged with expenses not authorized by you no matter when you report the loss or theft of your card. This is in accordance with the Fair Credit Billing Act which is designed to protect credit card holders from suffering financially because of unauthorized use of a credit card. Furthermore, if you incur unauthorized charges on your card after you report it lost or stolen, then you will not be liable to any debts at all.

              If you patronize a merchant and offer to pay for his or her goods or services with your credit card, the merchant has no right to impose a surcharge on your bill. This is because such a practice goes against the merchant account agreement the merchant signs with the credit card company. Merchants who do this are probably trying to protect their own interests because they have trouble collecting from their credit card companies or they just want to take advantage of you to compensate for the added work they need to do to get paid from the credit card company. Whatever the reason, the merchant does not have the right to charge you more just because you pay by card instead of cash. However, the merchant does have a right to offer a discount if you pay by cash instead of credit card.

              Merchants (especially at restaurants) do not have the right to place a hold on your credit card for the amount of the “estimated tip”. This happens at restaurants where your card is authorized to pay for the bill “plus 20%”. If you eventually pay less than the estimated tip the charge on your credit card is eventually changed but it initially appears as if your card has been overcharged. As a result, there have been many complaints from credit card holders over this which is why Visa has since banned the practice.

              If you have become swamped by credit card (and other) debt, consider filing a bankruptcy petition to discharge your debts. You can call us at (813) 200 4133 for a free discussion on how bankruptcy can eliminate your credit card debts and solve your other financial worries.

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                Bankruptcy of Payday Loans?

                When you are struggling financially and the mortgage lender is wanting to foreclose on you property, it is highly stressful and you may become desperate enough to do anything to get money. This is the time many people resort to short term loans and one of the most popular is the payday loan, also known as cash advance or cash advance loan. These loans are small amounts of cash designed to help tide you over till your next paycheck and their disbursements are regulated by state laws. A typical payday loan may be for as short as 7 days or as long as 30 days.

                But it is the interest rates of payday loans that are the killer. Believe it or not, some payday loan can charge as high as 390% annual percentage rate (APR) of interest. It may not seem obvious on paper when you look at the agreement but if you do the math, the interest rates of most payday loans are around that region. Would you take up a car loan or housing loan that charges you 390% in interest?
                When you take up a payday loans you will sign a Voluntary Wage Assignment agreement allowing your creditor the right to garnish your wages to pay for the loan and interest. All may seem well and good but if you are no longer able to keep up with the payments, and you want to cancel the standing instruction, it may be next to impossible to get it done on time. Besides that, your creditor has the right to file a lawsuit against you for the money you owe.

                This is why it is not advisable to sign a Voluntary Wage Agreement and take up a payday loan. But what if you have already taken up a payday loan and you are no longer able to afford paying it? The best thing to do in such a case would be to discharge the payday loan through a bankruptcy petition. Bankruptcy provides a way out of the vicious cycle of trying to keep up with paying off your payday loans (and other debts also).

                In the first place, my suggestion is not to take up a payday loan at all in the first place even if you are struggling financially. Looking at the above, it would be obvious why you should not do it. The better alternative to discharge your debts would be to file for bankruptcy which is a better option than pay such exorbitant interest rates on payday loans.

                If you need help overcoming your debt problems, consider filing a bankruptcy petition. Call us at (813) 200 4133 for a free consultation. financially and the mortgage lender is wanting to foreclose on you property, it is highly stressful and you may become desperate enough to do anything to get money. This is the time many people resort to short term loans and one of the most popular is the payday loan, also known as cash advance or cash advance loan. These loans are small amounts of cash designed to help tide you over till your next paycheck and their disbursements are regulated by state laws. A typical payday loan may be for as short as 7 days or as long as 30 days.

                But it is the interest rates of payday loans that are the killer. Believe it or not, some payday loan can charge as high as 390% annual percentage rate (APR) of interest. It may not seem obvious on paper when you look at the agreement but if you do the math, the interest rates of most payday loans are around that region. Would you take up a car loan or housing loan that charges you 390% in interest?
                When you take up a payday loans you will sign a Voluntary Wage Assignment agreement allowing your creditor the right to garnish your wages to pay for the loan and interest. All may seem well and good but if you are no longer able to keep up with the payments, and you want to cancel the standing instruction, it may be next to impossible to get it done on time. Besides that, your creditor has the right to file a lawsuit against you for the money you owe.

                This is why it is not advisable to sign a Voluntary Wage Agreement and take up a payday loan. But what if you have already taken up a payday loan and you are no longer able to afford paying it? The best thing to do in such a case would be to discharge the payday loan through a bankruptcy petition. Bankruptcy provides a way out of the vicious cycle of trying to keep up with paying off your payday loans (and other debts also).

                In the first place, my suggestion is not to take up a payday loan at all in the first place even if you are struggling financially. Looking at the above, it would be obvious why you should not do it. The better alternative to discharge your debts would be to file for bankruptcy which is a better option than pay such exorbitant interest rates on payday loans.

                If you need help overcoming your debt problems, consider filing a bankruptcy petition. Call us at (813) 200 4133 for a free consultation.

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                  Dangerous Misconception of Bankruptcy

                  As the economy continues to slow down, there are many people facing foreclosure of their homes. Bankruptcy is one way to put the brakes on foreclosure. But some people have a wrong concept of bankruptcy and think that it cannot avert foreclosure. David Kittle, Chairman of the Mortgage Bankers Association is one such person. Commenting on the government’s mortgage relief plan and bankruptcy, he said, “Our fear is that any borrower who can’t be helped by this [Obama mortgage relief] program will have a hard time being helped by bankruptcy. So their bankruptcy plan will fail, they will lose their home anyway, and will now be stuck with the black mark of bankruptcy on their record, inhibiting their ability to buy or rent a home in the future.”

                  This is a dangerous misconception on bankruptcy that may deprive many genuine debtors of the chance to have their debts discharged and starting anew financially. Let me explain.

                  The reason for Mr. Kittle’s observation is primarily homeowners who cannot keep up with their payments that come under Adjustable Rate Mortgages (ARMs). As the name suggests, the interest rate gets adjusted until the amount owed to the bank is higher than the value of the property, leaving the debtor to pay a monthly payment that is often 2 or 3 times the original amount. Face it, most people would not be able to meet their mortgage obligations once something like this happens.

                  So the only practical solution would be to either modify the loan with the help of the bank or file a bankruptcy petition. Making a bankruptcy filing is not a “black mark”; on the contrary, it shows that the petitioner is taking the correct action to confront his or her financial problems to settle their debts. A so-called “black mark” is when the debtor is not able to pay off any of his or her debts and continues to be debt-ridden for years.

                  For the most part, filing for bankruptcy will put a stop to the foreclosure process and save your home. Undoubtedly, your credit score will reflect that you have filed for bankruptcy but with prudent financial management over a few years after exiting bankruptcy, your credit score will certainly improve. So you will NOT have any “black mark” against your score.

                  If you wish to file for bankruptcy and rid yourself of your debts, call us at (813) 200 4133 for free consultation.

                   

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                    If your Income Increases during Bankruptcy

                    If you filed a Chapter 13 bankruptcy, it means you are under a payment plan set by the court to repay your debts over a period of time, usually anywhere between 3 to 5 years. This payment plan has you paying an amount of money each month set by the court according to your disposable income after taking into consideration essential expenses like food, clothing and shelter. But if your monthly income changes during the 3 to 5 years bankruptcy, you are obligated by law to declare it to your bankruptcy trustee. Most people would not hesitate to report any drop in income and ask for a lower payment amount repaying their debts but when it comes to an increase in income, some people try to hide it from the bankruptcy trustee for obvious reasons. For example, you may take on an extra job and conceal it from your bankruptcy trustee. Bad move.

                    A few years ago, there was a court case involving some debtors whose income increased during the course of their bankruptcy. In the case of Midgley, Robert and Karen; In re the debtors filed for Chapter 13 bankruptcy in 2005 stating their income as $5,972 and their monthly expenses as $5,517. The court fixed their monthly repayment as $455 (i.e. the difference between $5,972 and $5,517) and ordered them to report to the bankruptcy trustee if their gross income should increase by more than 10% at the time of filing. They were also ordered to declare their income tax returns and present it to the bankruptcy trustee every year.

                    But the debtors failed to keep their part of the agreement and did not present their income tax returns to the trustee on time. Their 2005 and 2006 income tax returns were only presented to the trustee in 2007 and 2008 respectively. Upon reviewing the returns, the bankruptcy trustee concluded that the debtors’ income had grown by 31% in 2005 and 35% in 2006, and this amounted to more than $76,000 in total. As a result, the bankruptcy court seized $76,000 in assets to repay their creditors and changed their bankruptcy plan.

                    All changes in income must be reported to the bankruptcy trustee immediately otherwise something like what happened in the case of Midgley, Robert and Karen; In re may happen to you. This is one of the reasons why you should hire a good bankruptcy attorney to help you navigate through all the pitfalls that may occur when filing a bankruptcy petition.

                    If you wish to file for bankruptcy or just want more information on how bankruptcy can end your financial debt problems, call us at (813) 200 4133 for a free consultation.

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