Rothschild & Ausbrooks Attorneys At Law | Middle Tennessee Bankruptcy Blog
This Bankruptcy blog by Rothschild & Ausbrooks, PLLC offers information and commentary for residents of Nashville, Tennessee. Our mission is to provide personalized and exceptional legal advice with service above expectations to our clients.
A significant portion of Nashville residents may presume that bankruptcy laws are misused. This likely comes from stories of celebrities or other people who are perceived to be "well to do" filing for bankruptcy yet continuing to enjoy seemingly lavish lifestyles. The truth, however, is that several regulations are in place to keep people who might be trying to use a personal bankruptcy for uses other than what it has been intended from doing so.
Chapter 7 filings are by far the most popular form of personal bankruptcy (with the American Bankruptcy Institute showing 472,190 of such cases being filed in 2017 alone). The main reason this particular type of bankruptcy is popular is because it allows certain types of debts to be discharged, freeing a debtor from having to settle them. This may be attractive for those who simply do not have the resources to meet all of their liabilities. Yet a discharge does not necessarily mean that a debt is gone forever.
The court can indeed revoke a discharge even after a bankruptcy case is closed. In such a case, the debtor would once again be obligated to pay the debt. According to the website for the United States Courts, circumstances that would warrant the court revoking a discharge include:
The debtor obtained the discharge fraudulently
The debtor failed to disclose that he or she acquired property that should have been included in the bankruptcy estate
The debtor failed to adequately explain misstatements or provide evidence asked for during an audit of the bankruptcy case
The commission of any debtor improprieties outlined in Section 727(a)(6) of the federal Bankruptcy Code could also result in a revocation. Typically, a party wanting a discharge to be revoked must file the request to do so within one year of the case's discharge date.
It might be easy for those in Nashville who are struggling with debt to think that the answer to their problems is to simply make more money. This no doubt comes from the perception that an abundance of income can easily overcome one's liabilities. Yet there are countless cases out there suggesting the contrary. People at all income levels may be subject to financial struggles, many of which are due to a plethora of circumstances. Some might be saddled with unexpected medical expenses; others might simply struggle in effectively managing their money. Then there are those who face a seemingly perfect storm of dire financial circumstances.
Such seems to be the case with a former first lady of the state of Oregon. Her financial woes may be traced back to 2014, when question arose about the propriety of her mixing elements of her public role as first lady with her private business. A local news publication attempted to secure her emails, to which she sued in an attempt to conceal them. She lost and was ultimately ordered to pay over $125,000 in legal fees. Apparently, she was struggling to line up work for her career at the time, which prompted her fiance (the governor) to deposit funds in her account to help her meet her expenses. This influence-peddling scandal would eventually force him from office. Her troubles (which have prompted her to file for a Chapter 13 bankruptcy) could be compounded if the current investigation into her conduct by the state's government ethics commission results in further fines.
When one's financial struggles begin to appear overwhelming, a Chapter 13 bankruptcy may be his or her best course of action to repay creditors while halting further collection activities. Those considering such action, however, may first wish to consult with a bankruptcy attorney.
Many people consider bankruptcy an intimidating process. You may also hold this idea, and while it certainly is a complex legal process to go through, you do not have to feel so intimidated that you choose not to consider it a debt relief option. If you earn a steady income and face substantial debt, you could qualify for Chapter 13 bankruptcy.
With Chapter 13, you work with a plan to pay back your creditors over the course of three to five years. However, not just any repayment plan will do. You must create a plan, present it to the court and have it approved. This part of the process is known as confirmation.
Timing for confirmation
After filing for Chapter 13 bankruptcy, you may feel ready to keep the ball rolling. However, many aspects of your case can change within the first couple of months of filing. Because of this potential, your confirmation hearing may not take place until approximately 60 days after your initial bankruptcy filing. You may think this time frame will allow you to second guess your decision and sit around feeling anxious, but you will have plenty to do during this time.
Additionally, your creditors still receive some payment until confirmation. These small amounts are known as "adequate protection."
Creating your proposal
As mentioned, you must create a repayment plan proposal that you will provide to the court. This part of the process may seem intimidating because you do not know the steps necessary for repaying creditors or what your plan should include. Fortunately, you can obtain legal assistance with this and all parts of your bankruptcy process, so you do not have to feel alone or lost.
When it comes to what to include in your plan, it will need the following information:
Which creditors you plan to pay
When you intend to pay those creditors
The portion of original debt you intend to pay
If the court approves your proposal, you will receive a confirmation order. This order allows you to more fully move forward with bankruptcy and begin making the payments necessary to address your debt. As long as you stick to your plan, you should remain eligible for the discharge of applicable debts. While Chapter 13 bankruptcy may seem intimidating to begin, it may be the route that helps you regain your financial freedom.
Many in Nashville often ask "when does filing for bankruptcy become your best option in dealing with your debt?" Unfortunately, there is no easy answer to that question. There may be cases where simply "tightening your belt" for six months to a year would allow to get your debts back under control. However, there may come a point where multiple creditors are looking to initiate collection activities against you, which could serve to further compound your struggles. In these situations, the automatic stay afforded through a Chapter 13 bankruptcy could prove to be beneficial.
What is an automatic stay? Simply put, an automatic stay halts collection activities in many (but not all) situations. Upon you filing for a Chapter 13 bankruptcy, the bankruptcy court clerk or trustee assigned to your case will notify all of the creditors (whose information you provide him or her with) of your case. This calls for the cessation of all activity being taken against you, including:
Per the website for the United States Courts, and automatic stay is often extremely helpful in two particular areas: stopping foreclosure and protecting joint account holders. Your bankruptcy case will halt any impending foreclosure proceedings and offer you the time needed to submit your outstanding back payments. Keep in mind, however, that you must continue to make your regular monthly mortgage payment during your case. A bankruptcy stay also prohibits creditors from going after parties that you may hold debts with (even if they themselves are not seeking bankruptcy protection).
As was mentioned earlier, there are certain collection activities that are not halted by a bankruptcy case. These include any expenses you may owe due to criminal activity, or child or spousal support arrears.
Tennessee residents are probably aware of the significant percentage of collage students who graduate with an overwhelming amount of debt. Many graduates now leave school with more than $100,000 in student loans, which are to be repaid even if they don't finish their degree program.
Significant loan obligations often mean years of fighting to make ends meet when there is insufficient income due to a low starting salary or hourly wage.
A life saddled by debt
Like other college students or recent graduates, you may find yourself in a sort of financial purgatory. Because of your age or lack of experience, you may not be able to secure a job that pays high enough wages to cover your loans. However, failure to pay your loans could lead to defaulting on them or issues with your credit. Consider the following facts about the student loan debt crisis:
Students who accumulate a large amount of debt at the beginning of their college career may be more likely to drop out because of finances.
Students working to pay off loans often have to work long and hard hours at minimum wage in order to make payments.
Students who drop out of school due to financial reasons often find it extremely difficult to get back into the same school as before.
In many cases, student loan debt is not eligible for discharge during the bankruptcy process. However, it is still possible that bankruptcy could offer you certain advantages and benefits. Individuals struggling with any type of loan debt would be wise to consider if filing for either Chapter 7 or Chapter 13 bankruptcy could be a smart choice for their future.
Fighting for a better future
The choice to file for bankruptcy is not for everyone. However, it could be a legal and organized way by which you can achieve a stronger financial future. If you are struggling with student loan debt, you do not have to wonder about your options, but you will benefit from a thorough explanation of the options available to you.
A complete evaluation of your case can help you understand if claiming undue hardship is appropriate, which can allow you to discharge your debt through a consumer bankruptcy filing.
Your struggles with credit card debt might seem embarrassing, yet you should know that you are hardly the only one in Nashville dealing with such an issue. Indeed, information shared by NerdWallet shows that credit card debt climbed to $931 billion in 2017. Given your contribution to that total, you might be considering a debt consolidation loan. Yet is that really your best course of action?
As is the case with many potential solutions to problems, it depends. Many companies offer low-, fixed-rate loans or even 0 percent interest credit cards onto which you can transfer the outstanding of all your other cards combined. These tools help to lower your monthly payment into something that is much more manageable. You do need to have strong credit to qualify for these tools, yet if you have a consistent income (and your total debt does not exceed 50 percent of that income), then a debt consolidation card or loan might help get you back on firm financial ground much sooner than you thought to be possible.
However, if overspending or an overreliance on credit led to your struggles, a change of mindset should accompany any debt consolidation tool. You should first have a plan to avoid accumulating future debts before consolidating your current ones. Consider the amount you owe prior to making this decision, as well. If only a little extra discipline on your part could have your debts paid off in a year or less, debt consolidation might not offer that great of an advantage. If your debts exceed 50 percent of your income, you might want to consider debt relief rather than consolidation. This information is not meant to be legal counsel, but rather good advice in helping deal with your finances.
If you are like most of those in Nashville for whom personal bankruptcy is looking more and more like its your only viable option to get out of debt, then you may adopt an attitude of just want to hurry through it and get it done. Your desire is understandable; this likely represents a chapter in your life that you would rather put behind to be able to move on to a brighter financial future. Unfortunately, bankruptcy court proceedings will sometimes try to slow the bankruptcy process down to both prevent the privilege from being abused as well as ensure if it is indeed the best option.
One of the ways the court does this is by requiring you (like all bankruptcy filers) to first go through credit counseling. Indeed, according to the Federal Trade Commission, both those pursuing Chapter 7 and Chapter 13 must complete credit counseling within 180 days prior to filing for bankruptcy. The purpose of this meeting is to obtain an outside perspective on your current financial situation. Part of the job of the credit counselor is to construct a budget to determine if you would be able to reasonably be able to repay your debts without having to file for bankruptcy. He or she will then review his or her plan with you (as well as offer some debt avoidance techniques. You are not legally required to accept the plan that he or she creates, but it must be included in your bankruptcy case paperwork.
The judge may review the credit counselor's plan and find it to be doable. Yet even in that case, the only change is that you would no longer be able to file for a Chapter 7 bankruptcy, and would instead be converted over to a Chapter 13.
Nashville residents might be surprised to learn that more than one-fourth of all U.S. households are laboring to pay large medical debt, according to The Atlantic. Unless, of course, they happen to be one of those families. What is more surprising is that those struggling with medical bills are not the patients with long-term illnesses but the ones who suffer a one-time illness who are struggling more.
A 2017 banking analysis took a look at medical costs and how they impacted middle-income families who earned about $57,000. Researchers looking at 250,000 checking accounts found household finances varied by nearly 30 percent, or $1,300, every month due to medical expenses.
They also found that 40 percent of the households incurred expenses of $1,500 or higher in a yearly period that could be attributed to car problems, taxes or medical expenses. For mid-income households, 16 percent had a single large medical expense, while 39 percent incurred such an expense in a three-year window.
What is really interesting is that the expenses came at about the same time as an increase in income. That may sound lucky, but researchers think it likely that family members typically delay some type of necessary medical care until they have some type of payout. The study shows that expenses came not only with a boost in income but also that the boost came in the form of a tax refund. Unfortunately, refunds, on the whole, do not pay the entire bill and most families—even a year after a big medical expense—continue to struggle financially.
The information in this article is general in nature and is not meant to be considered legal advice.
Tennessee is not immune to the sometimes widely fluctuating ebb and flow of local and global economies. If you've recently made your way through some pretty rough financial waters, you are definitely not alone in the struggle. In fact, Chapter 7 is often the means individuals choose for obtaining immediate debt relief when serious financial crises hit.
As you come off the end of a bankruptcy situation, however, you might be a bit worried about your future. If you take some time to talk with someone who has debt relief experience, you can learn more about how to rebuild financial stability. A past financial crisis need not keep you from moving forward to a stronger financial future.
Key factors to keep in mind
You may feel overwhelmed when thinking about starting over from the ground up. The following information may be useful as you create a plan to get things back on track in the wake of bankruptcy:
There's never a bad time to develop good spending habits. Especially if poor spending habits are part of what led to your initial financial problems, you'll want to keep close tabs on your expenditures and cut back on financial waste.
A bankruptcy shows on your credit report for seven to 10 years, depending on whether you filed Chapter 7 or Chapter 13.
Regular review of your credit report after discharge of your debts can help ensure that all information on your report is correct. You wouldn't want a paid debt to still show as delinquent!
Obtaining a secured line of credit is a great way to rebuild your credit score and regain financial independence. A card issuer agrees to provide anywhere from $200-$500 credit, which may increase as time goes on and you make timely payments to satisfy the balance every month.
You might also consider taking out a small personal loan to help increase your credit score. Of course, raising your score hinges upon staying caught up with your payments.
Achieving financial stability after bankruptcy is challenging. It can be quite stressful, especially if you run into legal obstacles related to your debt relief situation. You may also learn that not all your debts were dischargeable, in which case you'll likely continue making payments toward those debts as you try your best to lay the groundwork for a better financial future. The good news is that there are many financial and legal support resources available to assist you.
If you’re considering your bankruptcy options in Nashville, you may be wondering whether Chapter 7 is the best decision for you. While many people opt for Chapter 7 in order to get themselves back on track financially, it’s important for you to have all the facts before moving forward. That’s why Debt.org offers the following information on Chapter 7 to help you determine whether this option will satisfy you financial needs.
There are a few factors to look at that will help determine whether you’re a good candidate for this type of bankruptcy. For instance, are other areas of life affected by your debt? People in dire financial straits often experience issues within interpersonal relationships or might even develop emotional or mental complications as result. You should also take a close look at your finances. Does your amount of debt rival that of at least half of your yearly income? Do you earn less than other people in your area? Do you have little money left over after paying off your monthly debts? If so, filing for Chapter 7 might be a good choice.
Unsecured debt (such as credit cards or medical expenses) can be discharged by Chapter 7 bankruptcy. That means you won’t be accountable for paying off this type of debt once you are approved by the bankruptcy court. Additionally, you won’t have to worry about assets or possessions being seized, particularly when they are considered necessities (such as your car and home). Some types of debt cannot be discharged, however. Taxes, alimony, and child support payments will remain after the proceeding, as these fall outside the common exemptions.
Filing a petition will be the first step to get bankruptcy proceedings started. This entails providing information on your current financial state, including details of income and assets, tax returns going back at least two years, amount of debt, and any official agreements you’ve entered into. Next, creditors will be given an automatic stay, which means they must cease and desist collection efforts until the hearing has been completed. Once you’ve been granted Chapter 7, you can begin to rebuild your finances with a clean slate. In general, the entire process can take about four months to complete.