Archives for October 2015

Understanding the Discharge of Debt in Bankruptcy

Pile of billsMost people who have considered filing bankruptcy understand the fundamental difference between a Chapter 7 filing and a Chapter 13 petition. With a Chapter 7 bankruptcy, you may be able to discharge, or permanently terminate any obligation to repay, certain debts. Though discharge will occur in a Chapter 13, how you get there is different. Instead of subjecting assets to sale or liquidation, a Chapter 13 debtor restructures his/her debts, agreeing to repay creditors under new terms. A Chapter 13 Bankruptcy can discharge certain debts that are not dischargeable in Chapter 7 and there are limits and restrictions, though, on your right of discharge in a Chapter 7. Here are some of the debts you can and cannot extinguish in a Chapter 7 proceeding.

Dischargeable Debts in Chapter 7

A discharge will permanently release you from any obligation to repay a debt. Furthermore, your creditor will have no legal recourse to attempt to collect the debt. Under the bankruptcy code, there are 19 specific types of debts that cannot be discharged—all others generally qualify.

If you owe money for any reason, and that debt is secured by a lien, the discharge of the debt does not discharge the lien, unless the lien is removed in a separate proceeding. Accordingly, you may not owe any more on the obligation, but the creditor can still exercise the right to repossess the property under the lien. This is the subject of another article.

Non-Dischargeable Debts

Certain debts are always not discharged in both Chapter 7 and Chapter 13, and others can be discharged in Chapter 13 only. Here are some of them:

  • Child support or alimony “domestic support obligations”. Always not discharged.
  • Any other debt to a former spouse under a divorce judgment or marital property settlement is not dischargeable in Chapter 7 but can be discharged in Chapter 13.
  • In Chapter 13, or in a Chapter 7 where the Trustee has money to pay creditors, any debts not listed in your bankruptcy schedules
  • Unpaid income taxes, if a non-fraudulent tax return was filed. This is subject to complicated exceptions. Generally, if the return was last due over 3 years before the bankruptcy filing, the tax may be discharged. Note that most tax penalties ARE discharged.
  • Virtually all student loan debt, except in rare circumstances that qualify as “undue hardship” under a very hard test to meet.
  • In Chapter 7, amounts owed to governmental agencies for fines or penalties, except tax penalties for failure to pay or file tax returns. These CAN be discharged in Chapter 13 unless they were part of a criminal sentence.
  • Criminal fines, or restitution ordered as part of criminal sentencing.
  • Drunk driving or driving under the influence, if property damage or personal injury results.

There are also debts that may be discharged unless a creditor successfully object by filing a Complaint with the bankruptcy court. These include:

  • Purchases of luxury items on a credit card within 90 days of the bankruptcy filing, provided the total amount of such purchases exceeds $650
  • Cash advances of more than $925 within 70 days of a bankruptcy petition
  • Debts incurred through fraud, Consumer Fraud, misrepresentation or willful and malicious injury (eg assault or battery).

These rules are complex. The above is just a summary. If this is important to you, you should consult with a qualified and experienced bankruptcy attorney.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Student loans-a $2.5 trillion debtload-will the Supreme Court provide some relief?

For many years now, bankruptcy has provided no relief for virtually all student loans. The Bankruptcy Code makes them non-dischargeable except in cases of “undue hardship”, but Congress chose not to explain or define what that test might entail. Decades ago, when student loans could be discharged after 5 years, the 2d Circuit Court Appeals created a very high barrier to proving “undue hardship” under the “Brunner test”. That test has been adopted in many but not all other Circuit Courts of Appeal. Under that test, one must show almost no future capacity to pay, and show a good faith attempt to pay in the past.

Now, Bloomberg Business reports that a court case challenging the Brunner Test as unconstitutional may be headed to the US Supreme Court. “The Supreme Court may weigh in on a student debt battle”, October 19, 2015. The case was brought by a 57 year old recovering alcoholic, saddled with debt after business and law school. He lives with his mother and has been unable to find work due to a criminal record.

As the author points out, “It would be hard to overstate the significance of this case for people struggling with student debt. Student loans are the largest source of consumer debt aside from mortgages. The total amount of outstanding student debt is expected to double to $2.5 trillion in the next decade. One in four borrowers is either delinquent or in default on his or her student loans. A ruling in their favor would offer an escape from a type of debt that, until now, has followed even the most destitute borrowers to their deaths. A change in how loans are handled in bankruptcy would open the possibility of a fresh start for defaulted borrowers, who may see their loan balances balloon with fees and penalties while they don’t make any progress toward paying down their debt.

For the government, the stakes are about as high. If bankruptcy becomes a real option for people with student loans, the Education Department will have to contend with the reality that a good chunk of the $1 trillion-plus in outstanding debt is not ever going to be recovered.”

The Supreme Court does not have to agree to hear the case, but  may well do so, as this long-simmering problem has now evolved into a “split between the Circuits”, and may appeal to justices who dislike judge-made rules which cannot be supported by the language, structure and history of a statute.

Stay tuned.

How Will Bankruptcy Affect Your Present or Future Employment?

Will a Bankruptcy Filing Have an Effect on Your Current or a Future Job?

Paying bills onlineIf you are experiencing financial difficulty, you may be considering a bankruptcy filing. If you are in financial services, or a similar field, you may fear that you will be terminated if your employer discovers that you filed. You may also worry that a bankruptcy filing, as a matter of public record, will disqualify you for certain jobs in the future.

Your Current Job

Under the federal bankruptcy laws, any employer is expressly prohibited from terminating an employee, or from engaging in any retaliatory actions based solely on the employee’s having filed for bankruptcy protection. You cannot be transferred, demoted or denied any work-related benefits because you have filed for bankruptcy protection. This is generally true even if you are required to have a security clearance for your job. Experts say that people who have financial problems are at greater risk of being blackmailed. If you have sought protection through a bankruptcy proceeding, you general lower that risk.

The situation is different, though, if you have already been notified of a termination or any other change in your position, and then file for bankruptcy protection. A Chapter 7 or Chapter 13 petition won’t stop or suspend any employer action that began before the bankruptcy was filed.

Future Jobs

Whether you get hired is a bit different. The impact of a previous bankruptcy filing on your eligibility for future employment depends on whether your employer is a public or private entity. The bankruptcy law prohibits federal, state and local government agencies from using bankruptcy to make hiring decisions. No such rule applies to private employers.

Some firms, such as in the securities industry, have policies refusing to hire people who have filed bankruptcy. However, we know clients even in those fields who have gone back to work in those fields.

Whatever the situation, the important thing is how you deal with your bankruptcy. You still have your skills and abilities. If anything, going through the bankruptcy taught you important lessons. If the bankruptcy was caused by circumstances outside your control, or if you attempted to pay debts before resorting to it, these are factors that should be emphasized. It is also a good idea to bring these matters up and deal with them before the employer finds out. Definitely do not hide or lie about the bankruptcy. Lots of people file bankruptcy for good reasons, and move on to successful lives. You should be able to do so as well.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
Representing Clients across South Jersey

What Color Is Your Parachute: A Guide for Getting Control of Your Life

What Color Is Your Parachute: Still Relevant after 45 Years

In the aftermath of a bankruptcy, it’s not uncommon to find yourself looking for a new job. Loss of a job, income instability, or lack of income may be the biggest contributing factor to your financial problems. But looking for a job can be a painful, exhausting and “hit or miss” process. There are a lot of self-help books that promise to guide you through the process, but in our opinion, there’s one that stands head and shoulders above the rest: What Color Is Your Parachute, by Richard Bolles, initially self-published by the author in 1970 and now annually updated with the latest information and advice

The Fundamental Premises of the Book

According to Bolles, the traditional method of looking for a job—preparing and sending out a resume, responding to help wanted ads—is “heavily loaded toward failing the job hunter. Instead, Bolles still recommends (as he did in the initial version of the book) that a more successful method is to identify the places you want to work and then approach the people who work in those places that have the power to hire you. He cautions, though, that before you can choose those places, you need to do a lot of personal research and investigation—of yourself—so that you know what you want to do and where you want to do it, both geographically and institutionally.

Even though most of the basic tenets of Bolles’ book have remained unchanged over the last four decades, he has embraced technological changes, such as the Internet and social media. For example, he tells readers in his most recent edition that “Google is your new resume.” He also encourages job seekers to use Twitter, Facebook, LinkedIn and other sites to their benefit, as well as other, more targeted websites, such as Jobs With Friends.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we don’t just “sell” bankruptcies. We try to get our clients back on the road to financial stability and freedom. We know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at (856) 596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.
Representing Clients across South Jersey

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