One of the key purposes of bankruptcy is a fresh start. That is, all of your bills are wiped out once and for all. The lenders and credit reporting agencies are required to note your bankruptcy discharge (which essentially acts like a restraining order against collection) on your credit report. The New York Times recently reported that many of the large lenders are violating federal bankruptcy law by ignoring the injunction. When then happens, someone who wants their fresh start is unable to complete the loan process because the old debt shows up on credit reports. This unlawful practice has affected several Checkett & Pauly clients. However, we are always there to push back and force the lender or credit reporting agency to comply with the bankruptcy discharge and correct the credit report or face the consequences. You must be sure to stand up for yourself and ask for our help if a creditor breaks the law.
Yes, but you must earn it. We recommend that anyone who has completed their bankruptcy case make timely payments on consumer obligations such as mortgage and car loans. Another way to rebuild your credit is open a savings account and use a fully secured credit card. Be sure to pay the new credit card in full every month.
If you make your monthly payments in full and on time and show the lenders that you worked your way back, you will get reasonable and affordable credit again.
Consumer Financial Protection Bureau
News reports this week announced that the government is preparing further restrictions on debt collectors. The Fair Debt Collection Practices Act has been around for decades. Unfortunately, it is highly ineffective. The Act regulates some collectors, but certainly not all. It is loosely enforced. In fact, our clients continue to report illegal and abusive collection tactics. The Consumer Financial Protection Bureau is scheduled to issue a notice of its proposed rules. Hopefully, the new regulations will strike a balance between reasonable collection of valid debts and ensuring the privacy and dignity of those who owe money.
Student Loans in Collection
The Department of Education announced that it will create new rules to provide protection for students who take out educational loans. The regulations are designed to make it easier for borrowers in trouble to end the payment default and fully service their loans. Reportedly, private debt collectors under contract with the government were failing to offer the legally allowed repayment plans. The new regulations may well mean that the total debt repayment will be kept at 15% of monthly income. At Checkett & Pauly, we see many hard working people who have substantially more student loan debt than they can ever repay. Unfortunately, there are few available options. Hopefully, these new regulations will help borrowers get back on their feet and handle their loans in a reasonable and logical manner.
Bankruptcies in Decline
Although bankruptcies increased slightly in September this year, bankruptcy filings have been consistently declining for the last 35 months, not only in Western Missouri, but all over the country. Not surprisingly, no one can really explain the fall in bankruptcy filings. We believe part of the reason is because the economy is getting better and people are going back to work. Additionally, millions of people who filed for bankruptcy after the 2008 crash are ineligible to file for bankruptcy right now, and others no longer need bankruptcy protection. At Checkett & Pauly, we are always happy to see an economy where fewer people need our bankruptcy services.
This is a good question and a frequent question we get at Checkett & Pauly. Once you have made the tough decision to file bankruptcy your next question is probably how long will it take and how much will it cost. This blog post will speak only to Chapter 7 bankruptcies.
The first step is to visit Checkett & Pauly for your free initial consultation. We can get the standard Chapter 7 case on file within about three weeks, assuming the client provides us with all the information in a timely fashion. It is also important to note that Checkett & Pauly is the only bankruptcy law office in the Carthage area that has the Fast File service. With this option, you come to the office with all of your information, attorney fee, and filing fee, and by the time you leave you are in bankruptcy.
Once the case is filed you can assume approximately 40 days before we attend the meeting of creditors with the appointed trustee. Your discharge of debt is entered 60 days after that meeting. In most instances, the case is over at that point. A case may continue after the discharge if the Chapter 7 trustee is investigating assets, such as non-exempt equity in a vehicle or tax refund. We are always glad to discuss all of the ins and outs of Chapter 7 bankruptcy during your first appointment.
Update of February 28, 2014 blog post, entitled “Bankruptcy for Senior Citizens.”
The Supreme Court ruled just last week in the case of Law vs. Siegel that a bankruptcy debtor’s homestead exemption remains intact and that it cannot be subject to an assessment of the trustee’s costs or fees. In this case, the bankruptcy debtor created a fictional lien and engaged in fraudulent and reprehensible conduct. The trustee spent tens of thousands of dollars to set aside the fictitious lien. The bankruptcy court was outraged at the debtor’s conduct and allowed the trustee to take fees against the otherwise exempt homestead. The Supreme Court, however, ruled that the bankruptcy code clearly states that exemptions are not subject to administrative expenses. In summary, the court sympathized with the trustee who spent so much time and money all because of the debtor’s outrageous conduct, but found that the bankruptcy law was clear and that the trustee fees could not be taken from the debtor’s homestead.
A bill was recently introduced in the Senate that would allow individuals to terminate student loan debt if they had more than $10,000 in medical bills in the preceding three years. Numerous studies have proven that bankruptcies are caused by uninsured medical debt more than any other single factor. While medical debt is routinely discharged, termination of student loans is extremely difficult, next to impossible. The senator who introduced the bill explained that there is no reason to differentiate between medical debt and student loan debt. Recent estimates have shown that at least half of people who file for bankruptcy have enough medical debt to qualify for the student loan discharge. What is not explained is that the student loan industry is politically very powerful, meaning that this bill has little likelihood of passage.
No one likes to file bankruptcy. It is for that reason and perhaps others that many of our clients put off filing bankruptcy until there is an emergency, sometimes too late. It is not unusual for Checkett & Pauly to get panicked phone calls from potential clients explaining that a lender has repossessed a necessary vehicle before they have filed their bankruptcy. The good news is that this is an emergency that can be resolved, particularly in a Chapter 13 bankruptcy. We can often use the Bankruptcy Code to force a lender to return a validly repossessed vehicle so that our client can successfully get a fresh start and a successful Chapter 13 debt reorganization. The moral of the story is that while some emergencies can be fixed, do not wait until the last minute. However, if circumstances are such that you do not get the bankruptcy filed before repossession, please be sure to call Checkett & Pauly immediately, because there will not be a minute to spare.
There has been a great deal of publicity about the GM Chapter 11 during the past six years. There is no doubt but that the Chapter 11 and help from Washington has kept GM alive and millions of jobs in the United States. While this may seem unfair, it is the “fresh start” that everyone who files bankruptcy, no matter how big or small, wants to achieve. This is the bankruptcy part of the bankruptcy.
GM has recently faced another problem—faulty ignition switches in some GM vehicles that have caused deaths and serious injuries. The thinking in the bankruptcy community until recently was that the GM bankruptcy, much like any individual bankruptcy, would terminate any debt that preceded the filing of the case. Last week, word came down that GM may have committed fraud may and may have known about these problems and failed to make the appropriate disclosure to the bankruptcy court. This is a lesson well learned. Bankruptcy provides a fresh start and many other positive aspects for individuals and businesses in financial trouble. However, all of the good things quickly go away if the person or entity seeking bankruptcy protection is not completely truthful and accurate.
The use of non-compete clauses by employers has become more frequent. Jobs that seem to have nothing particularly private or confidential often require the employee to sign a non-compete agreement. It is important to remember that non-compete clauses are difficult, but certainly not impossible, to enforce in Missouri state courts. Some employees that cannot wait for the court system and need to go back to work sometimes file bankruptcy with the intended purpose of voiding a non‑compete clause. While such an action is a radical step, it is one of many alternatives to consider instead of being unemployed due to a non-compete agreement.