January 14, 2015

It’s that time of year again! How Bankruptcy affects your tax refund

by Brian D. Flick, Esq.

It’s tax time again and one of the most common questions practitioners get this time of year is how filing a chapter 7 will affect your tax refund. There is no simple answer however talk to you bankruptcy attorney about the applicable property exemptions that may cover not only your general refund but also parts of your refund attributable to child tax credit and/or earned income credit.

For those of you who are looking to file bankruptcy after you get your refund, it is very important to talk to a bankruptcy attorney before you get your refund to discuss the dos and don’ts of spending the money.

October 1, 2014

Make More Money and Live Longer

by Stuart Ing, Esq.

Fortune Magazine has a story summarizing a study showing that Chapter 13 bankruptcy protection “increases annual earnings by $5,562, decreases five-year mortality by 1.2 percentage points, and decreases five-year foreclosure rates by 19.1 percentage points.”

The authors of the study argue that bankruptcy protection stops garnishments and eliminates the garnishment’s disincentive to work (if a person being garnished has a low paying, unsatisfying job, losing 25% of their paycheck may convince them that working isn’t worth it.)

The authors also hypothesize that the automatic stay and discharge of bankruptcy relive a significant amount of stress for the debtor leading to a longer lifespan.

So if debt is causing you to make less money or making your lifespan shorter, make an appointment with your friendly neighborhood bankruptcy attorney and see what we can do for you.

September 9, 2014

Do You Really Need a Good Credit Score?

by Stuart Ing, Esq.

A older potential client comes into the office to discuss bankruptcy. After analyzing the client’s situation, I explain what bankruptcy can do for them. The client will lament that their credit score is/was so good and bankruptcy will give the client bad credit. At that point, I have to stop the client and ask them, Do you really need a good credit score?

Your credit score is based on various factors like amount of debt, are you in default on your debt, do you have a job, etc… All this info is crunched into a number that is supposed to tell a lender what the odds are you will pay back a debt. The higher the number, the more likely you are to pay back a debt. Generally speaking, the higher your credit score, the easier it is to get credit and the lower the interest rate will be.

For many older people, getting new credit in the future isn’t in the cards. They don’t want to get a mortgage, nor do they want to get a car loan in the future. They already have too much credit card debt and have sworn off using credit cards in the future. So if you’re not borrowing any money, a low credit score won’t effect you.

This leads to the other point I make, there is a cost to maintaining a high credit score. Lets say your minimum debt payment a month is $1000 and if you paid that $1000 for the next 5 years and didn’t borrow any more money, your debt would be paid off and your credit score would remain high. So in that scenario, your good credit score is going to cost you $60k over those 5 years.

Compare that to filing chapter 7 bankruptcy. Instead of paying the $1000 a month to creditors, the bankruptcy would discharge the debt within the first 3-4 months. So if you’re not going to get new credit in the future and the costs of food, gas, medical care, etc… going up, what’s more useful to you? $1000 extra per month or good credit?

August 7, 2014

How the Corinthian Colleges Shut Down will Effect Their Student Loans

by Stuart Ing, Esq.

In July, Corinthian Colleges, owners of Everest College, Heald College and WyoTech announced that they are closing down or selling off their schools. So what do their former students do about their student loans?

Jay Fleichman and Joshua Cohen, both attorneys doing student loan law, have put together an ebook outlining the rights of students attending Everest College, Heald College and WyoTech.

Check it out What You Need To Know About Your Corinthian Colleges Student Loans.

July 26, 2014

Are Obligations to Repay Tuition Credits Student Loans?

by Eric M. Boeing

Are obligations to repay tuition credits student loans? That’s the question addressed in a recent case out of the Bankruptcy Court for the Northern District of California.

Determining whether or not a particular debt is a student loan has become incredibly important in recent years. Congress’s 2005 reworking of the bankruptcy laws (“BAPCPA”) made student loans almost impossible to discharge. In the meantime, total student loan debt load in this country has risen to over one trillion dollars.

How does the Bankruptcy Code currently define student loans? They are either:

  • “Educational benefits or loans” made or backed by the government;
  • “Obligations to repay funds received as an educational benefit, scholarship, or stipend”; or
  • Debts incurred solely to pay the cost of attendance at a higher education institution eligible to participate in federal student aid programs.

The case (Institute of Imaginal Studies v. Christoff, No.13-10808, A.P. 13-3186 (Bankr. N.D. Cal. June 11, 2014)) involved a woman who had enrolled in a school in 2002. That year, the school agreed to give her a $6,000 tuition reduction, which she agreed to repay at $350/month upon completion of coursework or withdrawal from the school. In 2003 they entered into a similar agreement for a principal amount of $5,000. In 2009, she withdrew, having completed her coursework but not her dissertation. She filed her Chapter 7 bankruptcy case in 2013, and sought to determine the dischargeability of these debts. All parties agreed these were not loans made or backed by the government, and that the school was not a qualified higher education institution.  That left the second category as the only possible basis for exception from discharge.

The Court treated the matter as one of straightforward statutory interpretation: The Bankruptcy Code specifically mentions obligations to “repay funds received” (Section 523(a)(8)(ii)). Here, no funds were received; the school simply reduced its tuition. Previous cases had reached the opposite result, but the Court pointed out that they all dealt with the pre-BAPCPA law, which did not distinguish “funds received” from “loans”.

The decision has been appealed to the Ninth Circuit Bankruptcy Appellate Panel, but if it stands, it represents an exciting new way to chip away at the margins of the draconian student loan laws as they currently exist.

July 7, 2014

Will I lose my security clearance of I file bankruptcy?

by Brian D. Flick, Esq.

I hope everyone had a great Fourth of July weekend. I wanted to repost this article from the bankruptcy law network because I think this answers a very big question for a lot of you with security clearance. This article confirms what I’ve experienced honesty is the best policy.


June 20, 2014

Who Is the U.S. Trustee in the Bankruptcy Process?

by John Hilla

Someone You Hope You Will Not Meet in Your Chapter 7 or Chapter 13 Case

US Trustee

The U.S. Trustee’s Office is a division of the U.S. Department of Justice tasked with overseeing the bankruptcy process in the United States. The Role of the U.S. Trustee encompasses a number of different tasks, but the primary focus tends to be on a couple of different areas of specific concern to you as a consumer considering filing for bankruptcy:

  • “Safeguarding” Chapter 7 eligibility by scrutinizing the Means Tests and income and expenses of each Chapter 7 filed;
  • Ensuring that the people who you pay to help you prepare your petition are doing so within the framework of the law;
  • Appointing and supervising the Chapter 7 and Chapter 13 Trustees who you actually interface with in your bankruptcy proceedings; and
  • Prosecuting criminal cases related to bankruptcy matters when required.

The U.S. Trustee is tasked with policing not only the behavior of the real human beings actually filing bankruptcies in the U.S. but also the creditors responding to and filing claims for the debts they are allegedly owed within bankruptcy cases, but, as with Chapter 7 and Chapter 13 Trustee, the scrutiny laid upon creditors is very cursory relative to the amount of energy they spend policing the Means Test and the fees paid to debtors’ attorneys and (quite rightly) non-attorney “petition preparers.”

Should I Worry About the U.S. Trustee?

The vast majority of Chapter 7 and Chapter 13 cases filed do not involve any interaction with the U.S. Trustee. Although the staff and trial attorneys employed by the U.S. Trustee do review the transcripts of every 341 Meeting of Creditors meeting and Means Test and other petition Schedules filed in Chapter 7 cases, the reason that their role stops there in most cases is  because the filing debtor has hired a good bankruptcy attorney to assist them.

If you have retained an experienced bankruptcy attorney to assist you with your Chapter 7 or Chapter 13 filing, you will in all likelihood have little reason to be concerned about the U.S. Trustee. Your attorney will guide you through the assembly of the documentation required to accurately, honestly, and fully disclose all of the assets, debts, income, expenses, and other past and expected future financial transactions that are required to be disclosed in the bankruptcy petition. If you are eligible for Chapter 7 and it is the best option for you relative to other non-income considerations, your attorney will so advise you and guide you through that process. If you are not or Chapter 13 is the better option for you for a variety of reasons, your attorney will expertly guide you through that process.

The guidance of a knowledgeable bankruptcy lawyer is what will keep the U.S. Trustee away from your case. Attempting to draft your petition yourself or to calculate your own Means Test or paying a non-attorney “petition preparer” a few hundred bucks to “fill in the blanks” on the “bankruptcy forms” is a good way to put yourself in the cross-hairs of the U.S. Trustee.  It is potentially a good way to encounter Federal criminal charges, depending upon what you decide you don’t have to disclose.

If you are a Michigan resident and would like to explore your options for a Chapter 7 or Chapter 13 bankruptcy with an experienced Michigan bankruptcy attorney, please contact  The Hilla Law Firm, PLLC at (866) 674-2317 or click the button below to schedule a free, initial consultation.

Schedule a Free Consultation

If you enjoyed reading “Who or What Is the U.S. Trustee,” please browse Attorney Hilla’s other articles on his main Michigan Bankruptcy Blog.

June 19, 2014

In re Clark and Inherited IRAs

by Stuart Ing, Esq.

In a recent US Supreme Court decision, the Justices took a look at the issue of is an inherited IRA exempt under Federal exemptions (522(b)(3)(C).

In bankruptcy, pretty much all retirement plans recognized by the IRS are protected from being used by the Trustee to pay a Debtor’s creditors. So if you had $200k in your 401k, the Bankruptcy Court couldn’t force you to use those funds to pay creditors. Congress felt that retirement savings were more important that paying creditors.

In the In re Clark case, Ruth Heffron, who was the original IRA owner, died and her IRA was inherited by her daughter. The daughter ended up filing bankruptcy and the Trustee wanted to use the money in the inherited IRA to pay creditors. The Supreme Court ended up siding with the trustee.

But not all is lost. While the inherited IRAs may not be exempt under Federal exemptions, it may still be exempt under your state exemptions. So if you are the recipient of an inherited IRA and you are looking at filing bankruptcy, you need to make sure your attorney is up to date because you could be risking a lot of money if they aren’t

February 28, 2014

Bi-weekly does not equal semi-monthly: Why the difference matters so much

by Peter Bricks

By Peter Bricks , a Cumming, Georgia bankruptcy attorney.

I recently was replaced another attorney in the middle of a Chapter 13 bankruptcy case in the Northern District of Georgia. My new client mentioned that she had trouble making the plan payments of her confirmed Chapter 13 plan, which were $560 per month.

This client had employer deduction order for her monthly trustee payments. This means the payments were essentially garnished out of her paycheck and mailed to her bankruptcy trustee, which is fairly typical of Chapter 13 plans.

After reviewing the deduction order, I noticed something odd. The deduction order called for the debtor to pay $280 per paycheck. Why was this wrong? The debtor’s employer pays her bi-weekly and not semi-monthly.

While debtors often use the term interchangeably, they mean vastly different things. Someone paid bi-weekly gets paid 13 times over 6 months (26 times in a year), whereas someone paid semi-monthly only gets paid 12 times over 6 months (24 times a year).

In reviewing the debtor’s account ledger, I realized the debtor had overpaid her trustee payments by over $1,000, because this mistake had been going on for over a year.

A similar problem I face is when reviewing people’s monthly budgets, they often tell me what they spend weekly and then multiply that amount by four to get a monthly figure. This is also incorrect, because there are 4.33 weeks in a month.

Math mistakes like this can lead to all sorts of problems, particularly incorrect figures on a means test. Additionally, it can cause great interference with a Chapter 13 trustee payment, because the debtor is going to struggle to make payments if the figures he is using are incorrect.

Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys. He has bankruptcy attorney offices in Atlanta, Woodstock, Dunwoody, Cumming and Jonesboro, Georgia.

February 5, 2014

Minors Filing Bankruptcy

by Stuart Ing, Esq.

While is is very unusual, it possible for people under 18 to file bankruptcy. Why would a minor, who is not normally liable for debts, need to file bankruptcy?

Imagine this scenario. Father of child owns a house with a mortgage. Father dies, thus the child would inherit the house. Problem is, no one is paying the mortgage, so the lender wants to foreclose. Child is expecting life insurance proceeds from deceased father, but the foreclosure will happen before the insurance is paid. If nothing is done, child will lose the father’s house.

This is the situation that faced Shawn Powell, 10 years old, and his attorney Brett Weiss. To resolve the problem, the attorney filed a Chapter 13 Bankruptcy for Shawn, staying the foreclosure. The bankruptcy proceeding stayed the foreclosure long enough for the life insurance to come in and pay the mortgage. Read Shawn Powell’s story.

January 10, 2014

New Year – Time to evaluate your financial state

by Brian D. Flick, Esq.

With the wave of the holidays over, now is the perfect time to sit down with your finances and see what 2014 looks like.  I would encourage you if you are behind on your mortgage or very worried about the looming credit card bills to sit down with a skilled bankruptcy attorney to see if filing a bankruptcy may be the best option for you.

January 10, 2014

Today is the Day! – New Rules for Homeowner’s Take Effect courtesy of the Consumer Financial Protection Bureau

by Brian D. Flick, Esq.

Happy New Year everyone!  I wanted to get this article from the Washington Post out there for everyone.  The Consumer Financial Protection Bureau has implemented new rules for all servicers that every homeowner should know.


New mortgage rules aim to protect home buyers, owners

By Danielle Douglas, Friday, January 10, 12:01 AM

Six years after the housing meltdown exposed fissures in the system, new mortgage rules that will take effect Friday stand to remodel the market.

Housing groups worry that changes meant to shield Americans from abusive lending practices that contributed to the financial crisis will make it harder for many to buy homes. But experts say the rules will create sustainable homeownership by ensuring that borrowers can afford to repay their home loans.

“The rules may cut some credit [availability] at the margins, but as a whole they will ensure that borrowers have a product they can afford,” said Sam Khater, deputy chief economist at the housing data provider CoreLogic. “The terms of the debate are always about access to credit, but it’s also about access to sustainable homeownership.”

The reforms written by the Consumer Financial Protection Bureau aim to protect Americans in the process of buying a home and if they run into trouble paying their mortgages.

In prepared remarks for a field hearing in Phoenix on Friday, CFPB Director Richard Cordray said the bureau is taking a “back to basics approach to mortgage lending practices. No debt traps. No surprises. No runarounds.”

Lenders will have to verify borrowers’ income, assets and debt before signing them up for home loans. Such common-sense practices anchored the mortgage market for decades but were cast aside in the lead-up to the meltdown as banks relaxed standards to churn out more lucrative loans. The result was millions of homeowners who were unable to manage their mortgages once the market tanked.

In response, the CFPB has created a category of home loans that offer lenders broad legal protections against borrower lawsuits, provided they adhere to certain criteria. These “qualified mortgages” limit upfront fees and bar risky features such as no-interest periods that can leave homeowners stuck with unsustainable loans. The loans are available to consumers who have a debt burden that is no more than 43 percent of income.

In real estate markets such as Washington, where prices are high, prospective buyers could run up against the limit as they stretch their finances to buy homes. But some of the nation’s largest banks, including Wells Fargo, have said they will offer loans for high-priced homes that do not conform to the new standard.

David Stevens, chief executive of the Mortgage Bankers Association, is concerned that lower-income borrowers, who would fall outside the debt-to-income ratio requirements, will not fare as well as wealthier consumers.

“We’re seeing institutions building business models to take advantage of that side of the market, charging 8 percent to 9 percent interest rates,” he said. “We need clear consumer protections . . . but nobody wants to push middle-class families on the margins into a shadow industry of high-priced mortgages.”

In the year since the CFPB finalized the mortgage rules, the bureau has made tweaks for a smoother implementation. Stevens said he wants the bureau to relax the debt-to-income ratio, which he said may be unnecessary because regulators have eliminated risky loan features.

Lenders are under no obligation to issue only qualified mortgages; they just have to verify that borrowers have the ability to make their loan payments. However, banks, which have doled out billions in recent years to settle lawsuits related to mortgage abuses, are likely to gravitate toward the protections afforded under the new loan category, analysts said.

The qualified mortgage rule is part of a broader collection of reforms that include changes to the way borrowers interact with mortgage servicers. These firms that collect mortgage payments were criticized for mishandling borrowers’ requests for lower principle or interest payments during the meltdown.

Now, mortgage servicers will have to maintain accurate records, offer ongoing access to staff members and provide options for delinquent homeowners to avoid foreclosure or face enforcement from regulators.

“It may seem silly that we need rules to tell servicers to answer the phone; not to lose people’s paperwork; to tell borrowers how much they owe,” Cordray said. “But we have lived through the financial crisis. We have seen with our own eyes the grave dysfunctions in the mortgage market.”

It is possible that the average borrower will not feel a major impact from the new rules, because lenders have become more conservative since the crisis, said Ghazale Johnston, managing director of Accenture Credit Services.

“In the last few years, a lot of these lenders have spent time strengthening their underwriting requirements and putting in place tighter internal controls,” she said. “The impact of that has been higher-quality loans being originated. The steps banks have taken to eliminate the risks have inadvertently helped them prepare for the rules.”


January 2, 2014

Tax Refunds or Why Bankruptcy Flings Tend to Spike in the First Quarter of the Year

by Stuart Ing, Esq.

Here we are the the first business day of 2014. If this year is like the previous years, we will see an increase in filings from January through April. Why is that? Because it is tax refund season.

For a vast majority of people filing bankruptcy, every paycheck is already accounted for well before actually receiving the paycheck (first paycheck goes to rent, second goes to paying all the other bills). Thus coming up with the $2000 necessary to file a chapter 7 bankruptcy becomes a strain, even if paid in monthly installments. But once a year, during tax refund season, some people get back a a chunk of money that isn’t already accounted for. Due to tax credits like EIC and child tax credits, this refund can be quite large.

Say you got a $2000 tax refund check and you owe credit cards $40,000 and can’t really afford to pay the money minimums on the credit cards. What is going to be better for you, paying $2000 towards the credit cards (which after a few month, will be eaten up entirely by fees and interest) and continuing to make payments you can’t afford or paying it to your bankruptcy attorney and and eliminating the debt in its entirety?

Contact a bankruptcy attorney now so when you tax refunds come in, you can be ready to start the year on the right course. We can also advise you on what to do with any excess tax refunds you have to keep it out of the hands of your creditors.

November 20, 2013

Where should you file bankruptcy if you are about to move states?

by Peter Bricks

By Peter Bricks , an Atlanta bankruptcy attorney.

I sometimes get calls from debtors who are interested in filing bankruptcy and have either recently moved into town or are planning moving away. The first thing they need to decide is whether they should file bankruptcy in Atlanta or wherever they plan on moving next.

Bankruptcy venue is dictated by 11 USC 1408. That code section says “a case under title 11 may be commenced in the district court for the district—(1) in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is subject of such case have been located for the one hundred and eighty days immediately preceding such commencement, or for a longer portion of such one-hundred-and-eighty-day period than the domicile, residence, or principle place of business, in the United States, or principal assets in the United States, of such person were located in any other district.

Therefore, the first thing we need to decide is whether the debtor is even eligible to file in his current location. He might have just moved into town several weeks ago and is only eligible to file in the city he just moved from. He also might be eligible to file in two cities because his principal assets might be a different place than his domicile.

Once it’s been established whether the debtor is eligible to file at the moment in his current location, he should determine whether to do so makes sense. Take the example of the debtor who wishes to file Chapter 13 and is moving away in two weeks. Does that debtor want to establish venue in a place he will no longer live and then have to return for the meeting of creditors, confirmation hearing and other miscellaneous court hearings that might take place over the course of the case?

On the other hand, maybe the debtor cannot wait to file because he needs to immediately stop a garnishment or repossession.

Conversely, the Chapter 7 debtor in the same position might be more open to filing in the city he is leaving because he is likely to only need to make one court appearance in his case.

The point is there are a variety of factors the debtor should consider if he is changing residences, and he needs to think it through with a competent attorney and pick the right court to file the case.

Peter Bricks is a member of the National Association of Consumer Bankruptcy Attorneys. He has bankruptcy attorney offices in Atlanta, Woodstock, Dunwoody, Cumming and Jonesboro, Georgia.

October 3, 2013

Federal Government Shutdown and Bankruptcy

by Stuart Ing, Esq.

You can’t go more than a few seconds and not hear something about the government shutdown on the radio or TV. So how is this going to effect bankruptcies?

Right now, it is having some effect. Both the IRS and the Department of Justice are involved in many bankruptcy cases. Both of their bankruptcy staffs have been reduced so they may need extra time to properly respond to bankruptcy cases.

The Federal Courts have announced that they have about 10 days of cash on hand and can stay open until those funds dry up. So right now, cases are being filed, hearings are being heard; business as usual. What will happen after the 10 days are up is anyone guess right now.

The “non-essential” Federal employees are in a more tenuous situation. They have no idea if they will receive any retro-active pay. This on top of the sequestration cuts may be the thing that pushes their finances over the edge.


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