How Soon After I’ve Been Garnished Can I File Bankruptcy?

garnishmentWhen a creditor sues a debtor and get a judgment, the creditor (now judgment creditor) will try to collect from the debtor (now judgment debtor) by way of garnishment.

Garnishment is a legal procedure by which the judgment creditor is able to compel a party that owes money to the judgment debtor, to pay some or all of that money to the judgment creditor instead.

A common question when a judgment debtor is garnished is how to stop the garnishment?  Although there are statutory limits to how much of a judgment debtor’s wages can be garnished, the reduction in take-home pay caused by garnishment can put a dent in the judgment debtor’s ability to afford the basic necessities.

Bankruptcy is one way to stop garnishment.  Bankruptcy works by discharging the underlying obligation and enjoining any further effort to collect on the debt, by garnishment or by others methods.

Some judgment debtors believe that they must wait a certain minimum time after the start of garnishment before they can file for bankruptcy.   That’s a misconception —   there is no required waiting period for filing for bankruptcy after the start of garnishment.  There may be other considerations affecting the optimal time to file, but there is statutory waiting period associated with garnishment.

If you’re being garnished and would like to stop the process through the use of bankruptcy, drop us a line at tzink@mccarthyfingar.com.

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We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

THE EMOTIONAL SIDE OF FILING FOR BANKRUPTCY

get-ouf-of-debt

Filing for bankruptcy can evoke strong negative emotions.  But bankruptcy is not forever, and there are several benefits to taking the initiative to get rid of overwhelming debt.  Here is an article that explores some of these themes.

If you cannot sleep at night because of financial worries, call or email us to schedule a no-risk “Get Out of Debt Planning Session.”

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Feel free to drop a comment or ask a question below.

 

YOU CAN GET A MORTGAGE AFTER BANKRUPTCY

mortgage-approved

Make no mistake about it, filing for bankruptcy will tank your credit score, but the damage is not permanent.  Indeed, in certain cases, bankruptcy filers were able to get a mortgage in as little as two years after filing for bankruptcy protection.  Here is an excellent article on how to get a mortgage after bankruptcy.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Feel free to drop a comment or ask a question below.

 

Incarceration Does Not Relieve Chapter 7 Debtor of Credit Counseling Requirement

Credit Counseling Road Sign

Introduction

The Bankruptcy Code requires individual debtors to take credit and budget counseling during the 180 days preceding the commencement of the bankruptcy case.

The requirement applies to all consumer debtors regardless of which chapter the debtor files under and irrespective of whether the debtor has primarily consumer or business-related debts.

Exceptions to the Credit Counseling Requirement

The credit counseling requirement does not apply to a debtor the bankruptcy court determines is unable to complete the course because of “incapacity, disability, or active military duty in a military combat zone.”

“Disability” under the Bankruptcy Code means the debtor is “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone or internet briefing.”

Bankruptcy Court Denies Debtor’s Request for Exemption from Credit Counseling Requirement

In a recent case in the Southern District of Illinois, a pro se (not represented by a lawyer) debtor who was an inmate at a local prison asked the court to exempt him from the credit counseling requirement because he was physically unable to complete credit counseling as a consequence of his incarceration.

In essence, the debtor argued that he was “disabled” by his incarceration from being able to complete the credit counseling course.

The bankruptcy court denied the debtor’s motion and dismissed the debtor’s chapter 7 case.

Bankruptcy Court’s Dismissal Affirmed on Appeal

The bankruptcy court denied the debtor’s motion and the District Court affirmed the dismissal observing that [the Bankruptcy Code] provides certain clearly delineated exceptions to the [credit counseling] requirement and incarceration is not one of them.”

Conclusion

The Bankruptcy Code and related procedural rules are fairly complicated and contain numerous requirements that must be followed.  While there are often exceptions to such requirements, debtors are best advised not to test the limits of such exceptions where the failure to get the exception leads to dismissal of the case.

If you are contemplating personal bankruptcy and would like to learn more about the credit counseling and other requirements, call us 914-385-1032 or email us tzink@mccarthyfingar.com.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Feel free to ask a question or drop a comment below.

 

Fifty-Six Year Old Debtor Failed to Show “Undue Hardship” if Student Loan Debt in the Amount of $260,000 Was Not Discharged

Student loan debt is very difficult to discharge in bankruptcy.

new-student-loan-debt

Introduction

Student debt is normally not dischargeable in bankruptcy unless the debtor proves that excluding the loans from discharge “would impose an undue hardship on the debtor.”  The  following is a briefing on a representative case that shows how difficult it is to prove “undue hardship.”

Facts

In In re Tetzlaff, the Seventh Circuit Court of Appeals affirmed the District Court’s affirmance of a bankruptcy court decision holding that a chapter 7 consumer debtor failed to demonstrate “undue hardship” if his student loan debt was not discharged.

The debtor was a 56 year old, unemployed, divorced man living with his mother and subsisting with her on the income from her Social Security payments.  He pursued, and apparently obtained, a Masters in Business Administration and a law degree but failed repeated efforts to pass a state bar exam.  Prior to attending graduate school he worked as a financial advisor, an employee-benefits consultant, an insurance salesman and a stock broker.  He suffered with depression and alcoholism and was involved in domestic disputes.  He has several misdemeanor convictions.  He contended that these factors make it difficult for him to find a job.

The Debtor’s Bankruptcy Case and Efforts to Discharge Student Loan Debt

The debtor filed for chapter 7 bankruptcy and sought, as part of his case, to have student debt incurred in connection with the pursuit of the MBA degree discharged.  Student debt is normally not dischargeable in bankruptcy unless the debtor proves that excluding the loans from discharge “would impose an undue hardship on the debtor.”

What is Undue Hardship for Purposes of Discharging Student Loan Debt?

The Seventh Circuit, in determining what situations constitute “undue hardship,” has adopted the so-called “Brunner” test.  That test requires the debtor to show that:

(1) he cannot maintain, based on current in-come and expenses, a “minimal” standard of living for himself and his dependents if forced to repay his loans;

(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and

(3) he made good faith efforts to repay the loans.

In this case, the bankruptcy court found that the debtor satisfied the first element, but that he failed to meet the latter two elements.  The District Court affirmed, and the debtor appealed.  On appeal, the Seventh Court accepted for purposes of its analysis that the debtor had met the first Brunner element, and proceeded to examine the “additional circumstances” prong and the “good faith” prong.

The “Additional Circumstances” Prong of Undue Hardship

In the case, the Seventh Circuit construed the “additional circumstances” test to require a showing of a “certainty of hopelessness, [and] not simply a present inability to fulfill financial commitment.”  The appellate court concluded that the bankruptcy court’s findings that (i) the debtor’s financial situation may improve given his MBA, his intelligence and his writing ability; (ii) his family issues were largely over, and (iii) the debtor is not mentally ill and is able to earn a living were not clearly erroneous and amply supported the bankruptcy court’s ruling that the debtor failed to satisfy the “additional circumstances” test.

The “Good Faith” Prong of Undue Hardship

As for the “good faith” prong, the Seventh Circuit observed that a debtor’s demonstrated efforts to pay off existing loans, together with a debtor’s ability to obtain employment, maximize income and minimize expenses is relevant to assessing the debtor’s good faith.  While the debtor had repaid much of his law school student loan debt, he paid nothing on the debt at issue in the case.  The debtor argued that his pay down of the unrelated debt was material to his good faith showing, but the Seventh Circuit was not persuaded, observing that the debtor’s repayment of other student loan debt does not demonstrate good faith to pay the wholly unpaid student loan debt that was sought to be discharged.  In support, the Seventh Circuit cited a case from another district holding that “there is no authority that suggests a debtor who pays down on loan while neglecting another acts in good faith.”  Under these circumstances, the Seventh Circuit affirmed the bankruptcy court’s conclusion that the debtor failed to make a good faith effort to pay down student loan debt.

Key Takeaway

Student loan debt continues to be problematic in consumer bankruptcy cases and “undue hardship” is generally not susceptible to simple proof.

If you’re struggling with too much debt, whether or not its student loan related, and would like to consider options for dealing with your situation, contact my office 914-385-1032, or tzink@mccarthyfingar.com.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

 

debt

THE THREE MOST SUBSTANTIAL BENEFITS OF A BANKRUPTCY DISCHARGE

bankruptcy-discharge

The principal reason for filing for chapter 7 bankruptcy protection is to get a discharge of debts.  The discharge wipes the slate clean and promotes your fresh financial start.  How, exactly, do you benefit from a discharge?  Here are three of the most significant benefits.

First, the discharge cancels your obligation to repay debt.  You are no longer legally obligated to pay the bills, debts, loans and claims that are discharged.  In effect, the liability side of your personal “balance sheet” is wiped clean.

Second, your creditors are forever prevented from attempting to collect discharged debts from you.  No more creditor  phone calls, letters, threats, lawsuits, garnishments, levies or other action to force you to pay up.

Third, the money you were using to pay debts is now free to use for other purposes nearer and dearer to your heart.  Perhaps you want to start saving for your child’s college fund, or a vacation, or need money to help an elderly parent or relative.  The money  previously devoted to keeping creditors at bay is yours to spend as you wish.

If you’d like to discuss how a bankruptcy discharge can improve your situation, contact my office for a free 15-minute consultation.  We can be reached at 914-385-1032 or at tzink@mccarthyfingar.com

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

CHAPTER 7 BANKRUPTY IN 7 STEPS — WHAT HAPPENS AFTER I DECIDE TO FILE FOR BANKRUPTCY?

erase-debt

Introduction

You’ve decided that bankruptcy is the best way for you get rid of debt you cannot pay and stop collection hassles and harassment. How exactly, does a chapter 7 case unfold and how long will the process take?

Although chapter 7 of the Bankruptcy Code is a powerful tool with a lot of important moving parts and consequences, from a “thirty-thousand foot” view, the process can be broken down into the following 7 steps.

Step One; Pre-Bankruptcy Planning. You’ve decided to file for bankruptcy. Assemble your bills, creditor letters, lawsuits, check stubs, and other papers related to your financial situation and go see an attorney who has experience helping people, like yourself, navigate through chapter 7. The consultation will include an assessment of your financial situation, whether bankruptcy is right for you, and if so, when would be the best time to file and other pre-bankruptcy planning topics to enable you to take full advantage of your chapter 7 case.

Step Two; Pre-Bankruptcy Credit Counseling. Take a credit counseling briefing from an agency approved by the Office of the US Trustee. The Bankruptcy Code requires that individual debtors take a briefing from an approved credit counseling agency sometime within the 180 day period ending on the date you file for bankruptcy. The counseling can take place over the phone or Internet or in person. The agency will charge between $25 and $50 for the course, but most agencies will waive the fee for debtors who cannot afford to pay. During the session, the credit counseling agency may, or may not, prepare a budget for you. At the completion of the briefing, the agency will give you a certificate of completion, which, in most jurisdictions, will have to be filed along with your bankruptcy petition.

Step Three; Prepare the Necessary Paperwork. Work with your bankruptcy attorney’s office to prepare your bankruptcy petition, schedules of assets and liabilities, statement of financial affairs and other papers. It is vitally important that the papers you file to start your bankruptcy case are complete, accurate and truthful. Serious punitive consequences can happen if you are less than forthright in preparing schedules, your statement of financial affairs and other bankruptcy papers.

Step Four; The Actual Filing Itself. File your petition, credit counseling certificate of completion, schedules, statements and filing fee. This kicks off your case, creates an automatic stay of creditor enforcement activity, and starts a process that hopefully leads to a discharge of all debts that can be discharged in your bankruptcy case.

Step Five; The Section 341 Creditors’ Meeting. Assemble information to take to, and prepare for, your section 341 creditors’ meeting. All debtors must submit to questioning by a chapter 7 trustee at the “341 meeting” or “meeting of creditors.” At the meeting, the trustee will ask a series of questions regarding your assets and liabilities and pre-bankruptcy financial transactions. Most meetings last no longer than 7 to 10 minutes and although creditors are invited to attend and ask you questions, most creditors do not show up at the 341 meeting.

Step Six; Post-Petition Financial Management Course. Take a personal financial management course from an agency approved by the US Trustee’s Office. This course is different and separate from the credit counseling course you took before you filed your bankruptcy case. The course takes about an hour and is available on the phone, over the Internet or can be done in person. At the conclusion of the course, the agency will give you a certificate of completion that you will be required to file with the bankruptcy court.

Step Seven; Receipt of Your Discharge Order. Await the arrival, usually about four months after you filed your bankruptcy petition, of an order of the bankruptcy court granting you a discharge. The discharge wipes away the debt that can be discharged in bankruptcy, prevents creditors from trying to recover against you for debts that were discharged, and is your ticket to a “fresh start” in your financial life.

Conclusion

There you have it: chapter 7 in 7 steps.

If you think bankruptcy might be the right solution to your financial problems, please contact my office for a consultation. 914-385-1032.

ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES

We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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