Can you pay your creditors after your bankruptcy?

You absolutely are able to do this. You may voluntarily pay any debt you wish after a bankruptcy, even if it has been discharged. You are under no obligation to do so, and the creditor can never legally request or force you to pay debts which have been discharged.

So, why would you want to pay a creditor if you don’t have to? Because all debts are discharged in bankruptcy, unless they are nondischargeable, like student loans, there is no obligation to pay. But if the debt is owed to a family member, or your family doctor, you may be inclined to pay this debt back. Not because you have to. But because you want to.

You should be careful, however, in choosing the debts that you wish to pay back after the debt has been discharged in a bankruptcy. Be especially careful if the debt is a credit card. Sophisticated creditors sometimes find ways to re-obligate you on the debt.  I have a few clever agreements that create a brand new debt, one that includes an amount that was discharged, and the new debt becomes an obligation that you have to pay, even the part of it that used to be discharged.  So, be careful what you sign, call your bankruptcy attorney if you don’t understand what will happen to the debt that was discharged.

Chapter 13 cases that pay only attorney fees DISMISSED!

Consumers today regularly shop for the best bankruptcy attorney.

This does not necessarily mean the best price, often meaning the lowest price, for these legal services!

Since the bankruptcy law was significantly changed in 2005, attorney fees for bankruptcy services have increased rather significantly. As a result, it is sometimes difficult for someone who needs a bankruptcy to pay for the costs associated with it. Sometimes, attorneys will offer to file a Chapter 13 bankruptcy to someone who is qualified for Chapter 7 but is having problems coming up with the fee to pay the attorney.

The reason for this is that the attorney fees in a Chapter 13 can be paid over a period of 3 to 5 years. So, one strategy that a few attorneys are using today is to allow the person to file a Chapter 13 and pay back virtually none of the unsecured creditors, which is just like a Chapter 7, and pay the attorneys fees out over 3 to 5 years. Recently, the court has disallowed such practices.

A bankruptcy Court in Massachusetts ruled that this is an abuse of the bankruptcy system. The attorney in that case was ordered to refund all of the fees charged to the consumer. The court held that the cases were not filed in good faith.

In our office, we offer a payment plan to people who need our services to file a Chapter 7 but also need time to pay. We generally advise our clients to stop make in payments to credit cards and medical bills and we take all of the creditor telephone calls, communicating with the creditor and helping our clients to not receive the abusive phone calls.

Sometimes we take these telephone calls for several months while our clients save up the money to pay for our services. This works very well and has for many years.  Its part of the service we provide.

Tax refunds and bankruptcy

I regularly receive this question: Will the trustee take my tax refund every year?  The answer is, as usual, it depends. So lets take a look at some of the factors that go into answering this question.

First, in a Chapter 7, you want to look at what time of the year you filed your bankruptcy. The trustee, or more accurately, your bankruptcy estate, only owns that part of the refund that is due to you as of the date that you file. So, if you file on July 1, then one half of the calendar year has passed and one half of the tax refund that you might receive in the following year could be considered part of your bankruptcy estate and could be taken by the trustee.

However, as usual, there is more to this. Part of your tax refund might be due to the child tax credit or due to earned income credit. The trustee is not entitled to any of this money. Also, there are exemptions which can be applied to save or protect part of your tax refund. In Ohio, there is a wild card exemption of slightly over $1000 which can be applied to any property, including your tax refund.

In Chapter 13, you’re in a bankruptcy for up to five years. Therefore, every tax refund that you receive while you are in a Chapter 13 bankruptcy may be considered by the trustee. The same rules apply. The trustee is not entitled to take any earned income credit or child tax credit. Also, you generally are entitled to apply your exemption to the tax refund.

So, you can see, the answer is not as black and white as it may seem and the application of these rules means that in one case a family might be able to keep a rather large tax refund and in another case a family may lose a large portion of the tax refund. It all depends on the circumstances of the case, and what the tax refund is based upon.

Do I qualify to file bankruptcy?

Many people wonder if they qualify to file bankruptcy. They know that they are in financial trouble. They know that they cannot pay all of their bills. Their income has dropped due to job loss or illness. Bankruptcy is an option they are considering. Do they qualify to file, and if so what will the bankruptcy do for them?

There is no minimum amount of debt that is required to qualify to file bankruptcy. Our office has filed individuals who owe less than $5000. And, we have filed bankruptcy for those who owe more than $1 million dollars. In both cases, the individual involved needed to file the bankruptcy. What may be impossible for one person to pay might be very possible for another person or family.

There are limits on what you can owe in a Chapter 13 bankruptcy. Most consumers do not have a problem with these limits. There is no such limitation in a Chapter 7. However, if you have the ability to pay all or some of your debt, then the law will probably only qualify you for a Chapter 13. This is actually good news for the consumer, because the ability to pay some of your debt much better than having no ability to pay anything at all.

Other factors to consider if you are qualified to file bankruptcy is whether or not you have filed a previous bankruptcy. If you have filed a Chapter 7 in the previous eight years, and received a discharge in that case, then you are not qualified to file another chapter 7. The waiting time between Chapter 7 cases is eight years.

This does not mean, however, that you are out of luck if you need to file bankruptcy and have filed a Chapter 7 within the last eight years. You may file a Chapter 13 and get a discharge if you have filed no previous bankruptcy and received a discharge within the last four years. In Chapter 13, you pay back only 1% to 100% of your unsecured debt. Therefore, a Chapter 13 actually may be almost identical in its result as if you had filed a Chapter 7.

Am I judgment proof?

Dear West Hurley & Malkiewicz,

I am considering making an appointment for bankruptcy protection but a friend told me about a program that makes you “judgement proof” if your only income is social security. I’m not sure if I can qualify for that because my husband is still working. (The credit cards I have are all in my name).

If I would qualify for this could your company handle this for me?

Sincerely, (name removed by Rick West)

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Great Question.

There is no such program. But, often folks who have only social security income are judgement-proof, and I frequently tell them they need not file, since creditors cannot garnish social security income.

But, this does not mean that one has nothing to fear from creditors if their income is only social security. I frequently see retired people who have savings in the bank that could be taken by creditors, or houses paid off that could be lost to creditors, or vehicles that are paid for.

Yes, creditors, even credit card creditors, can take your house and car if you don’t pay them.

So, you see, just having social security income and not looking at other aspects of your situation could be a recipe for disaster.

Always best to call us up and discuss these things. The call is free. You don’t even need to come to the office. We are happy to help you understand if you are judgement proof, – really – or not.

Do I qualify to file bankruptcy?

Many people wonder if they qualify to file bankruptcy. They know that they are in financial trouble. They know that they cannot pay all of their bills. Their income may have dropped due to job loss or illness. Bankruptcy is an option they are considering. Do they qualify to file, and if so what will the bankruptcy do for them?

There is no minimum amount of debt that is required to qualify to file bankruptcy. Our office has filed individuals who owe less than $5,000. And, we have filed bankruptcy for those who owe more than $1 million dollars. In both cases, the individual involved needed to file the bankruptcy. What may be impossible for one person to pay might be very possible for another individual.

There are limits on what you can owe in a Chapter 13 bankruptcy. Most consumers do not have a problem with these limits. There is no such limitation in a Chapter 7. However, if you have the ability to pay all or some of your debt, then the law will probably only qualify you for a Chapter 13. This is actually good news for the consumer, because the ability to pay some of your debt much better than having no ability to pay anything at all.

Other factors to consider if you are qualified to file bankruptcy is whether or not you have filed a previous bankruptcy. If you have filed a Chapter 7 in the previous eight years, and received a discharge in that case, then you are not qualified to file another chapter 7. The waiting time between Chapter 7 cases is eight years.

This does not mean, however, that you are out of luck if you need to file bankruptcy and have filed a Chapter 7 within the last eight years. You may file a Chapter 13 and get a discharge if you have filed no previous bankruptcy and received a discharge within the last four years. In Chapter 13, you pay back only 1% to 100% of your unsecured debt. Therefore, a Chapter 13 actually may be almost identical in its result as if you had filed a Chapter 7.

A Step Forward – Not A Defeat

Everyone knows that there are times to move forward and times when you stop to regroup.

In hindsight, we all know that sometimes things that seem bad. At the time, we see later as blessings in disguise.

Better to regroup, cut your losses and start over than to stick your head in the sand and pretend that you can somehow win a losing a battle. That’s how the war gets lost. It’s the same with sports, it’s the same with life.

All good, honest, hard-working people suffer setbacks.

If anyone tells you different they are either lying to you or fooling themselves.

Why?

Because life is sometimes brutal and unforgiving.

And, its that way for everyone.

The good thing is that in life you always have a choice.

You can choose to sit there and just take it giving up, giving in, and getting bitter, and let debt win – or you can be smart about it.

You can ADMIT and ACCEPT that you need help and that help might mean filing bankruptcy. You need to look at the game differently. Quit labeling bankruptcy as defeat,
and see that it really is a step forward, not back, you can do it!

Bankruptcy Can Help. Bankruptcy is not a defeat.

Defeat is NOT filing bankruptcy when it would do your family the most good.