Uncovering the student loan myth.

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The belief that student loans are never dischargeable in bankruptcy makes us us cringe every time we see it – and we see it a lot.

We cringe because it’s not true. You actually can get your student loan discharged in bankruptcy in some limited cases. In fact, according to a study published in 2011 by Jason Iuliano, at least 40 percent of borrowers who do include their student loans in their bankruptcy filing end up with some or all of their student debt discharged.

The problem is the old tale that has consumers thinking there’s no chance to have these loans discharged, so they don’t try. Iuliano’s report found that only about 0.1 percent of consumers with student loans attempt to include them in their bankruptcy proceedings.

To be clear, if you borrow money, you have a moral and legal obligation to pay that money back, even if that means making some financial sacrifices. It is strongly recommended that students do more cost-benefit analysis and long-range planning before taking on student debt of any amount.

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Can Chapter 7 bankruptcy help me get my driver’s license back?

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Question

Some time ago I got fined for a traffic violation. I wasn’t able to pay the fines, and the state took away my driver’s license. I am planning to file for Chapter 7 bankruptcy and hope to discharge the traffic fines. If I do, can I get my driver’s license back?

Answer

If the state took away your driver’s license because you didn’t pay your traffic fines, you can’t discharge (eliminate) those fines in Chapter 7 bankruptcy. But Chapter 7 bankruptcy can help you pay back your traffic fines by eliminating many of your other debts. Read on to learn more about whether Chapter 7 bankruptcy can help you get your driver’s license back.

You Can’t Discharge Traffic Fines in Chapter 7 Bankruptcy

You can’t discharge certain types of obligations in Chapter 7 bankruptcy. Unfortunately, traffic fines are one of those debts. Bankruptcy laws state that a Chapter 7 discharge will not wipe out fines or penalties you owe to a governmental unit.

This means that filing for Chapter 7 bankruptcy will not discharge your outstanding traffic fines. But if you were unable to pay your fines because you had too many other debts, Chapter 7 bankruptcy can help you by wiping out many of your obligations and allowing you to pay the fines and get your driver’s license back (discussed below).

Chapter 7 Bankruptcy May Help You Pay Your Traffic Fines

Just because you can’t discharge your traffic fines in Chapter 7 bankruptcy doesn’t mean that filing a Chapter 7 case will not help you. In many cases, debtors file for Chapter 7 bankruptcy because their income doesn’t allow them to meet all of their monthly financial obligations.

If you could not pay your traffic fines because you didn’t have any money left after paying obligations such as credit cards and medical bills, filing for Chapter 7 bankruptcy can help you eliminate those debts and free up money in your budget. If you will have enough money in your budget to pay the traffic fines after filing for Chapter 7 bankruptcy, it might still be in your best interest to file.

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How a Bankruptcy Attorney Can Help You

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Corporations and other businesses are required to declare bankruptcy through an attorney. However, individuals are allowed to represent themselves in bankruptcy proceedings. You may be tempted to declare bankruptcy without a lawyer’s assistance. The process may appear simple. You may wish to avoid involving others in a situation that is already stressful. And obviously, money can be tight during this process. However, there are excellent reasons to ask for an attorney’s advice and assistance during any bankruptcy.
A bankruptcy proceeding can be an extremely stressful situation. There is no reason to go through that stress without getting the most benefit possible out of it. An attorney can help you ensure that your bankruptcy goes smoothly and save you money—as well as stress—in the long run. Here are some things a bankruptcy attorney can offer:
Information. Bankruptcy law can be complex. A bankruptcy can take several months to complete. This can add stress to what is already a bad situation. An attorney who practices in bankruptcy law can help you to understand this process. Your attorney can offer you strategies and alternatives that you might not have known about. Having this information can be vital to planning your bankruptcy. An attorney can also give you valuable advice during the process of a bankruptcy.
Expertise. Bankruptcies require a lot of paperwork. Different bankruptcy courts have different rules. You must provide the bankruptcy court with information on all of your debts, property, and financial information. Bankruptcies involve communication with the court, creditors, and trustees. You must also follow the rules specific to the court in your jurisdiction.
All paperwork for a bankruptcy must be filled out correctly, or you can risk not having your debts cancelled. Bankruptcy documents are randomly audited to prevent fraud. If you make a mistake in providing information, you can face prosecution for fraud. Obviously, the best way to protect yourself is to Call Firebaugh and Andrews at 734-722-2999  who has experience in these issues.
To get the most out of your bankruptcy proceeding and protect yourself from mistakes, it is vital to get an attorney’s assistance. An attorney who practices in bankruptcy law will understand how to submit information to the courts and to your creditors, to ensure that your debts will be discharged.
 
Protection. Even after you retain a lawyer, your creditors can still contact you. However, Firebaugh & Andrews can help to stop harassing phone calls. Having someone else take over the hassle of dealing with your creditors can save you time and energy—and make sure that you gain peace of mind during as well as after the bankruptcy process. Your attorney can also help you make sure that debts discharged during your bankruptcy do not show up on credit reports in the future.
Bankruptcy can be a painful process, but there are ways to reduce the stress involved.
Firebaugh & Andrews can help, call today for your free consultation. 734-722-2999

 

5 Bankruptcy Myths Debunked

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While some assume that a bankruptcy filing means the person can’t resist the temptation of credit cards (and in some cases, it may), most people who will file for bankruptcy do so for other reasons. Here’s a look at some of the myths surrounding consumer bankruptcy.

1. People who file for bankruptcy are financially irresponsible. “There’s always going to be some kind of abuse, but it’s far more likely that people run into very serious personal problems in one of three areas: losing their job, going through a divorce, or suffering a serious illness,” says Walter W. Miller Jr., who teaches bankruptcy law at Boston University School of Law.

Long-term unemployment, the legal fees associated with divorce, the cost of running two households following a divorce, or the high cost of medical care have all driven well-intention Americans into bankruptcy. As of April 2012, more than 5.2 million Americans had been unemployed for six months or longer, according to the Bureau of Labor Statistics. Meanwhile, a 2011 survey by the Centers for Disease Control and Prevention found that 20 percent of American families had problems paying medical bills in the past year.

2. Bankruptcy discharges all past debts. Many people file bankruptcy hoping they’ll be able to start fresh afterwards, but several types of debt are not discharged by bankruptcy. “If you have domestic support obligations [such as alimony or child support], those can’t be removed under any circumstances, “If you have to pay restitution because of a crime, that’s another debt that can’t be removed.”

As a result of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, student loan debts also fall in that category, although a Congressional bill called the Fairness for Struggling Students Act would allow private student loans to be discharged in bankruptcy court. According to Epstein, student loans can be forgiven if you’re able to prove a hardship such as permanent disability, but that process is separate from bankruptcy.

Tax debts are sometimes reduced or discharged depending on the circumstances, but as Epstein says, “if you didn’t file tax returns, there’s no way you’re going to get those tax debts removed.”
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Here Is Exactly Why People Who File Bankruptcy Are Smart

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Today the biggest financial calamity looming ahead of 50 percent of people is not their immediate debt but the failure to set sights further down the road and look at the retirement crisis to come. Putting off dealing with your debt can cost you the very money you will need to retire and be able to afford to eat and live even just a moderate life. If you want to see what limping along in a failed debt relief strategy will cost you,  It is a legal choice made when the debt situation is hopeless. I am certainly not recommending bankruptcy as a casual solution and I’ve seen very few people who use it that way. In fact the percentage of people who file bankruptcy more than once is very small.

If you’ve decided to move ahead with bankruptcy then here are some good tips shared with me by Rick Abelmann, a bankruptcy attorney in Hawaii.

What Not to Do Before Bankruptcy

Debt can creep up on you. Perhaps you had a credit card that started out with a low interest rate. You have that credit available, so why not buy a couple of things that you wanted for a while, but haven’t been able to afford? Or, perhaps you’re using it to buy something essential. Either way, that interest rate suddenly balloons, or the amount you owe grows larger every month, until you simply cannot keep up.

That is the point when you might want to consider filing for bankruptcy. That’s a scary word these days, but the truth is it is meant to provide some protection, and a way forward, for people who are unable to pay their debts. Speaking with a lawyer or financial planner can be helpful, but if you find yourself in over your head, filing bankruptcy may be your only option.

That are lots of guides, and lots of people, out there that can help you navigate the first few steps in the filing process. However, there are some things that you definitely do not want to do before filing for bankruptcy.

1. Don’t Pay Creditors
Avoid making any large or unusual payments. This can seem counterintuitive, but is an important point. It may seem like you should pay creditors if you are able, but it can cause problems later on. This is not to say you shouldn’t make routine payments or pay bills. You should still pay your monthly credit card bill, if you can, and your electric bill and so forth. However, large payments to single creditors, or paying off a whole debt, can cause problems after you file. These are called ‘preferential transfers,’ meaning that one creditor has benefited unfairly over others. This is particularly true if the debt you pay off is to a relative or friend. These creditors can be sued later by the court, and have the money taken away.

2. Don’t Run Up New Debt
It may be obvious, but it is worth saying. Do not, if you plan on filing for bankruptcy, run up new debt unless it is absolutely necessary. As the saying goes, if you find yourself in deep, the first thing to do is stop digging. The consequences of running up new debt can be serious. The new creditor can claim you took out that loan, opened the credit card, or ran up the balance on an existing card, without intending to pay it back. This can legally be considered fraud, and that debt, in particular, will not be discharged in bankruptcy proceedings. You will still owe the whole of that debt.

3. Don’t Make Any Unusual Transactions
Again, you should continue to pay routine bills. No one will object to you paying for food or other expenses that cannot be avoided. Any transactions beyond the routine should be avoided, again, unless necessary. Some people try to transfer money or assets to relatives or friends in the hope that this will prevent the court from seizing them. This is an incorrect belief, and the court may end up suing for the return of the assets. If you own a business, in whole or in part, do not try to transfer it or remove your name. Do not transfer titles of cars or homes. Definitely do not buy new luxury goods or make unnecessary purchases. All of these things can be classified as fraud, and have unpleasant consequences.

4. Don’t Keep It to Yourself
You may be considering bankruptcy because you are being sued, or because creditors are threatening to sue. If this is the case, do not wait to tell them you are filing, or considering filing. Creditors may attempt to garnish wages or seize assets to discharge a debt, which could be avoided by filing for bankruptcy. Money and assets can be retrieved in some cases after filing, but it is difficult and can be expensive. It is better to avoid the problem by informing creditors of your plans before any of these problems arise.

5. Don’t Provide Inaccurate Information
You are required, in the process of filing for bankruptcy, to provide full and complete information. Any debt, assets, accounts, and other financial information has to be provided. Attempting to hide information can, again, be considered fraud. Fraud is a serious issue, and can prevent debts from being discharged in bankruptcy proceedings. It can also potentially lead to criminal charges.

7. Don’t Drain Retirement Funds
In many cases, you are allowed to retain retirement funds and accounts. Rather than draining these accounts to pay debts, it may be preferable to file for bankruptcy and keep your retirement funds intact. The specifics of which accounts are safe from bankruptcy proceedings and which are not will vary depending on the specifics of the situation and the laws of your particular area. It is usually a good idea to consult with a lawyer before making decisions in regards to retirement funds.

8. Don’t File If You Are About To Receive A Large Sum
Perhaps this is another no-brainer, but you should not file for bankruptcy if you are about to receive a large sum of money that will allow you to pay your debts in all or in part. Bankruptcy can be helpful in many cases, but if you can resolve your financial situation without filing, that is probably preferable. This money may be seized by a court representative and used to pay your debts, also, when you might have been able to reach another arrangement with your creditors.

The primary factor in many of these cases is time. Many jurisdictions have a specific time period, usually 70 to 90 days, before filing, during which you should not make any major changes or transactions. However, it can be dangerous to think you can out maneuver the court and find sneaky ways to retain your assets. Being honest and upfront is the most likely way to reach a positive outcome.

Call Firebaugh & Andrews for your free consultation 734-722-2999

What circumstances will allow you to include your school loan in your bankruptcy.

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Every year, millions of students are convinced to take on student loans with promises of huge salaries upon graduation, but often the reality is a bit different and these same students are left with an enormous debt and little or no means of repayment. Indeed, these debts can last for decades.

Millions cannot afford to repay their student loan, some may think that filing chapter 13 can be done with your school loan but it is not 9 out of 10 times. Now what circumstances may allow you to include your school debt into your bankruptcy?

The very rare exception is when one can show at the time of the bankruptcy that the debt created by the student loans is going to create an unreasonable burden to the debtor and that the debtor will never be able to make payments, often because of a disability or other circumstance beyond the debtor’s control. Absent that, the debts to federal student loan companies are exempted from bankruptcy and will not be discharged. If you believe you are in such a situation contact Firebaugh & Andrews are these circumstances are very rare and there is only one way to find out, call us now for your free consultation 734-722-2999.

Bankruptcy And Bad Credit Issues No Longer Means No Mortgage

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Just because you have been bankrupted doesn’t mean it’s impossible to become a home owner again soon. This articles blows away the myth that you will have to wait 10 years to get a mortgage if you have been personally bankrupted.

In the past, traditional mortgage lenders have automatically rejected people who had declared personal bankruptcy.  Many potential home-buyers felt they must wait at least seven to 10 years after a bankruptcy to be eligible to become homeowners. This is a common misconception for many who believe their chance of home ownership is a long way away.

While some people declaring bankruptcy have had trouble managing their money, a large number of those declaring have simply experienced unfortunate events. Americans are filing bankruptcy at record-high levels over the last 10 years.

There are some ominous signs out there…

Though a bankruptcy is certainly a blemish on a credit report, it does not necessarily disqualify a borrower. Recognizing that sometimes bad things happen to good people, some select loan officers are becoming more willing to take a calculated risk.

Some lenders use a securing system to determine whether potential buyers are a worthwhile risk. Unfortunately, bankruptcy gives a low rating. However, select lenders are beginning to look beyond the rating and look at the individuals in need.

Instead of waiting two or four years after being discharged from bankruptcy, some mortgage professionals are willing to give a home loan much sooner. Those who have declared bankruptcy liquidation may be eligible for a loan one year after discharge.

Another common misconception is that a previous bankruptcy on your credit report will require you to have a large down payment and pay extremely high interest rates. There are currently programs available with as little as 5 percent down with very attractive rates.

Some lenders are even pre-qualifying buyers for a loan, saving time and making the home-buying experience easier and more efficient. When a buyer pre-qualifies they will have the advantage of greater negotiating power.

No matter what the situation, select mortgage professionals have a program that will work for the buyer with a bankruptcy history. If a buyer cannot get approved, there are customized plans that can re-establish credit to help the buyer become mortgage-ready, ensuring home-ownership in the future.

Because of new options, bankruptcy no longer needs to stand in the way of getting a home loan. With the help of more creative lenders, those who have experienced financial difficulty will have an easier time getting a mortgage.

For a free consultation call Firebaugh and Andrews. 734-722-2999

Are the fees I paid my bankruptcy lawyer and trustee tax deductible?

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Basic Information Bankruptcy fees paid to lawyers and trustees can be either a tax deduction or not and it will depend on the type of bankruptcy filed, Chapter 7 or 13, and on the items included in the petition. In order to take any bankruptcy expense as a deductible item on your taxes, you will need to file a Form 1040 and itemize your expenses. If you file using the short form, you will not be allowed to claim any itemized deductions.

Deductions Allowed by IRS
Regular legal expenses for Chapter 7 and 13 bankruptcies and the filing fees, $299 for Chapter 7 and $274 for Chapter 13, are not deductible as defined in IRS Publication 908, the Bankruptcy Tax guide, which rules these fees as personal expenditures. However, if your attorney spends time communicating with the IRS regarding any tax issues you have; those fees are deductible and will be listed as a miscellaneous expense on your Schedule A tax form. Any fees that you pay to either your attorney or an accountant for the preparation of your taxes while you are in a bankruptcy proceeding will be taxable itemized deductions on your Schedule A Tax Form.

Allowable Expenses as Tax Deductions
Any item paid in your plan to a trustee that would normally be a tax deduction, such as back federal or state taxes, spousal support, delinquent mortgage payments or mortgage interest, can still be taken as a personal tax deduction. These are expenses that you are paying through the bankruptcy distribution process by your payment plan administrator, the trustee, and it is the same as if you were writing the check yourself. It is a good practice to ask an accountant or your attorney if you are not sure whether an item is deductible or not.

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Filing for Chapter 11 Bankruptcy Protection (Business Bankruptcy)

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What Happens Pursuant to Chapter 11?
When a business files for Chapter 11, the business is provided an opportunity to propose a reorganization plan. If an agreement with creditors is not reached during that time then the creditors are provided with an opportunity to propose a reorganization plan.  The plans must meet specific criteria in order for to be approved by the bankruptcy court.  If a reorganization plan is not reached and agreed to by the creditors then the Bankruptcy Court can either convert the case to a Chapter 7 bankruptcy proceeding or it can discharge the case entirely.

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What are the Basics of a Chapter 7 Bankruptcy?

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When people talk about filing bankruptcy, they usually are referring to Chapter 7 bankruptcy, which allows you to discharge, or wipe out, most debts that you owe. In many cases, filing Chapter 7 bankruptcy is the quickest and easiest way for a person who owes a lot of debt to get a “fresh start” in life. So long as you are eligible for Chapter 7 bankruptcy relief, and depending on your individual situation, you could find yourself free of all dischargeable debts within just a few short months.