Higher Median Incomes Effective April 1st

As explained on the Chapter 7 page and Chapter 13 page of my site, most bankruptcy eligibility questions key off how your income compares to the median income levels set by the Justice Department for the state in which you live.  The justice department has a new median income update which becomes effective April 1, 2014.  The income levels for all family sizes in Minnesota have gone up by at least another $1,000 or so per year.   The new median incomes are are follows:

1 Person 2 People 3 People 4 People 5 People 6 People 7 People
$49,592 $65,398 $78,715 $92,277 $100,377 $108,477 $116,577
  • Add $8,100 for each individual in excess of 7.

Every case is different, but in most cases if your gross income annualized over the six months before filing comes to less than the median for your household size, you should qualify for a Chapter 7 bankruptcy.  If your income is higher than the median, there are other options.  One option is to try doing the means test.  If you pass, a Chapter 7 might still be possible.  If not, your most likely choice would then be to do a Chapter 13 bankruptcy.

Even if you pass the means test, sometimes a Chapter 13 is still a better idea.  It seems that once your income is above median, the trustee’s office presumes that you are not entitled to a Chapter 7.  You will have to be ready to prove all the information that you put in the means test.  You may be asked for several months of bank statements.  You may be asked about the income of any children or other individuals in your household.  The reasonableness of the expenses you claim may be challenged.  By the time the trustee is finished with this process, you may decide to convert your Chapter 7 to a Chapter 13; and if you don’t you may neverthless wish you had started with a 13 in the first place.

While there are mathematical formulas involved, it remains more of an art than a science.  The trustee’s office looks at the numbers but also at the totality of the circumstances in deciding how much trouble if any to give you. You need to get a competent lawyer and stay close to that person as you go through the process.

This post is for general information purposes only and does not create an attorney-client relationship.  It is not legal advice.  I am a debt relief agency, helping people file for relief under the federal bankruptcy code.

Getting Rid of that Judgment Once and For All

Hennepin County District Court

When you read about bankruptcy you are very likely to see quite of bit of carrying on about stopping garnishment, stopping foreclosure, ending harassment from creditors, stopping those nasty phone calls, and in general making the debts just go away.  Bankruptcy tends to be good for all those things.  You may not see as much about getting judgments cleared from your record, however, because the discharge of your debts from the bankruptcy court does not automatically do that.

The bankruptcy court discharge is an order from a bankruptcy judge which eliminates most personal liability for unsecured debts.  It contains among other things an order addressed to your creditors requiring that they make no further collection efforts.  It just requires the creditors to stop.  For the most part, it doesn’t require the creditors to take any other action.  One of the things it does not require is that they file a satisfaction of judgment with the state district court if they have a judgment against you.  So when your bankruptcy is done, the creditors will leave you alone.  You won’t hear from them again.  If the creditor has a judgment against you, the creditor is prohibited from trying to collect anything on the judgment.  But the judgment itself just sits there and continues to be a matter of public record just as it was before the bankruptcy.

Most of the time for most people that is a big “SO WHAT?”  As long as the creditor is paralyzed and can’t collect, who cares whether the judgment is still on the record?  After all, the judgment will expire when it is ten years old, and the bankruptcy discharge definitely prevents the creditor from renewing the judgment before it expires.  But sometimes a lender will care if you are trying to get a mortgage or refinance an existing mortgage.  In certain odd instances an employer or future employer might care too – judgments don’t look the best on a background check.

If you should be one of the relatively rare folks who really needs to get the judgment cleared from the state court record, there is a procedure for doing that.  It is not part of the federal bankruptcy statute, but is a matter of state law.  In Minnesota, the process is laid out in Minnesota Statutes Section 548.181.  The clerk of court in most Minnesota counties can provide you with a form for this and a set of instructions to go with it.  The form and instructions for Hennepin County can be found here.  The statute is fairly easy to understand and reads as follows:

“548.181 DISCHARGE OF JUDGMENTS AGAINST BANKRUPTCY DEBTORS.

Subdivision 1.Application for discharge.
 A judgment debtor who has received a discharge under United States Code, title 11, or an interested party, upon paying a filing fee of $5 for each judgment, may apply to the court administrator of any court for the discharge of all judgments entered in that court against the judgment debtor that were ordered discharged by the bankruptcy discharge.
Subd. 2.Application requirements; service. 
An application under subdivision 1 must identify each judgment to be discharged, must be accompanied by a certified copy of the judgment debtor’s bankruptcy discharge or a certificate by the clerk of the United States Bankruptcy Court of the discharge, must state the time the judgment creditor has to object as specified in subdivision 3 and the grounds for objection as specified in subdivision 4, must be served at the expense of the applicant on each judgment creditor either:(1) in the manner provided for the service of a summons in a civil action and must be accompanied by an affidavit of service; or(2) by certified mail to the judgment creditor’s last known address as it appears in the court record, and must be accompanied by an affidavit of mailing.
Subd. 3.Objection to discharge.
 The court administrator, without further notice or hearing, shall discharge each judgment except a judgment in favor of a judgment creditor who has filed an objection to discharge of the judgment within 20 days after service of the application on the judgment creditor. An objection to discharge of a judgment must be served on the judgment debtor in the same manner as an answer in a civil action.
Subd. 3a.Certification of discharge. 
Upon receipt of a filing fee of $5, the court administrator shall certify to the judgment debtor or other interested party the judgments against a person that have been discharged by the administrator.
Subd. 4.Court order. 
If a judgment creditor objects to the discharge of a judgment, on motion of the judgment debtor, the judgment creditor, or other interested party, the court shall order the judgment discharged except to the extent that: (1) the debt represented by the judgment was not discharged by the bankruptcy discharge; or (2) the judgment was an enforceable lien on real property when the bankruptcy discharge was entered. If the judgment was an enforceable lien on some, but not all, real property of the judgment debtor, the discharge shall only be entered as to real property not subject to an enforceable lien.

 

That looks pretty easy doesn’t it?

Well, IT’S NOT AS EASY AS IT SEEMS.  Here’s the catch. Even though the law clearly states that the filing fee is only $5.00, Hennepin County has started charging a regular district court filing fee of $324 as well as the $5.00.  As far as I know, they are the only county in the state that is doing that, but don’t be surprised if you run into it in some other county.  I expect that the idea is going to spread.  You have to pay one filing fee per judgment, so if you have a lot of judgments to get rid of this could really run into money.  It’s probably a violation of law for them to be doing this, but for a few hundred dollars nobody so far has been able to afford to challenge it.

Around the year 2000 the court clerks across the state came up with forms and instructions for this that are available to the public.  Since then nobody has hired me to do this procedure. You definitely need a lawyer to do the bankruptcy itself, but once the bankruptcy is completed most people can do this judgment discharge application themselves.

This post is for general information purposes only and does not create an attorney-client relationship.  It is not legal advice.  It is recommended that you consult the attorney of your choice concerning the details of your case.

Driven to Bankruptcy by Health Insurance Costs?

Rebuilding Credit After Bankruptcy

Here’s a first that may not be the last.  Received a call from a gentleman who says that because of the new health insurance law, he has to sign up for health insurance which will start in January.  The substantial per month cost will make it impossible for him to keep up with payments on his credit cards, and he wants to file for Chapter 7 bankruptcy.

This is the first call like this that I have received, but I expect that it won’t be the last.  Of course I’m sure it can be said that he needed the health insurance anyway, and sooner or later he may have been driven to bankruptcy by the medical bills resulting from being uninsured.

Minnesota Bankruptcy Court Still Open – Employees Apparently Working Without Pay

Judge Gregory Kishel, Chief Judge of the U.S. Bankruptcy Court for the District of Minnesota, said last week at the bar association’s Bankruptcy Institute that the bankruptcy court for our state had enough money to make payroll and pay expenses through Monday October 14th or thereabouts.  After that he said it was his intention and the intention of all the staff to continue working without pay.  As close as I can tell, that must be what they are doing.  I just got a routine legal notice from the court in my email about two hours ago.  So I know that somebody is there and on the job right now.

I don’t know how long they can go on like that, but the way the judge was talking it sounded as if they were prepared to stick it out for the duration.  This has been a good thing from my perspective, because I have been able to continue my work with very little noticeable side effects from the shutdown.  So far the only thing that has come up has been that I found a mistake in a proof of claim form which the IRS filed in one of my Chapter 13 cases.  When I picked up the phone to call the IRS guy who had prepared the claim form, I got a message that the IRS office was closed because of the government shutdown.

The news I heard this morning before coming to the office was all about possible default on the national debt unless something is done in the next few hours.  That would mean, depending on who one listens to, anything between possibly almost nothing at best and a terrible crash and depression like that of  1929 at worst.  So in looking for a graphic to go with this post, I have decided to pull out my picture of the fiscal cliff.  Hard to know what is really going to happen.  Guess I’ll fasten my seat belt and hang on for the ride.

Bankruptcy Court Says They’ll Stay Open for Ten Business Days

Minneapolis Federal Courthouse, where Hennpin County Bankruptcy cases are filed

Late yesterday I received the following email from the clerk of bankruptcy court in Minneapolis:

“In the event of a government shutdown on October 1, 2013, the United States Bankruptcy Court for the District of Minnesota will be open and will maintain normal hours and operations for approximately 10 business days.  All proceedings and deadlines remain in effect as scheduled and CM/ECF will be available for the electronic filing and review of documents.”  
 

This somewhat surprised me because last week I received the following email from the clerk of federal court’s office in Minneapolis:

"JUDICIARY TO REMAIN OPEN IF GOVERNMENT SHUTS DOWN

In the event there is a government shutdown beginning October 1, 2013, the United States District Court for the District of Minnesota will continue normal operations Tuesday, October 1, 2013. All cases, including civil and criminal jury trials, will be processed and argued and judgments will be issued and enforced according to usual schedules and priorities. The Clerk’s Office will be fully operational and CM/ECF will continue to be fully functional.”   (CM/ECF means Case Management/Electronic Case Files.)

I always thought of the bankruptcy court as being a branch of the federal judiciary, and the earlier of the two emails seemed to be saying that the federal judiciary would not be shut down at all.   Guess I misunderstood that.  Apparently if the government shutdown continues for more than two weeks, we can expect the bankruptcy court to close.

Either way the news for now is that the Minnesota bankruptcy court is open for business as usual.  Filings are being accepted and nothing is being postponed or rescheduled.  I expect that this is at least in part because there are very stiff filing fees in bankruptcy court.  Right now the filing fee for a Chapter 7 is $306 and  the filing fee for a Chapter 13 is $281.  Late last week I was charged $30 to file an amended document with the court.  I imagine that at any one time there are  enough of these fees in the pipeline to keep the place going for a while.

Nevertheless, I invite all my clients to keep an eye out for emails and phone messages from me concerning possible delay or rescheduling of creditor meetings or other events. The word for today is UNCERTAINTY.

This post is for general information purposes only, is not legal advice and does not create an attorney-client relationship.  I am a debt relief agency.  I help people file for relief under the federal bankruptcy code.

Don’t sign a Reaffirmation Agreement Without a Really Compelling Reason

Nothing is better than being debt free.

The title of this blog post is a nearly exact quote of what I just told a client in a Chapter 7 case.  In that case over the course of a week I had received a proposed reaffirmation agreement from a credit union for a car loan and another one from a bank for a second mortgage.

I told my client that I thought she should sign the first one but that I was really against her signing the second one.  Why such seemingly contradictory advice?  Here’s a summary, with names and other identifying specifics omitted, of how I explained it in an email to my client:

There’s a lot of stuff I need to tell you about.  None of it is bad news,  just routine.  Here goes.

A reaffirmation agreement is a contract which, when filed with the bankruptcy court before the discharge date, reinstates a particular debt as if the bankruptcy never took place.  I usually advise against signing them, but if you really want to you can do it anyway.  I can’t stop you.  I don’t like reaffirmation agreements because they usually have language in them that says paying will not be a hardship or problem for you at all.  This contradicts everything else we have said in your bankruptcy petition, so I don’t want to have you sign unless there is a really compelling reason.

In the past couple of days I have received proposed reaffirmation agreements from (the bank holding the second mortgage) and from (the credit union holding the car loan). The (agreements are) attached …….

The thing with (the credit union with the car loan) is simple.  If you don’t sign it they will probably repossess your car.  So my advice as to that one is you better go ahead and sign it.  I would call that a compelling reason.  The time frame on that is that they have 60 days from the date of our ….. hearing (or meeting of creditors) to get it filed with the court.  What I would like to do is sit down with you, go over it and get your signature on all the right signature lines on it when I see you on (the date of the meeting of creditors); and then I’ll take care of sending it back to (the credit union).  They won’t do anything nasty if they have it in time to get it filed before the discharge, which is 60 days after the hearing.

As to (the bank holding the third mortgage), my advice is the exact opposite.  (Under Minnesota Law )They can’t foreclose as long as you keep making the payments.  The law (in Minnesota) concerning cars is way different from the law concerning homes.  The worst consequence (In Minnesota) of not reaffirming is that they won’t report your payments to the credit bureaus.  You can deal with that problem by keeping good records of your own so you can prove the payments have been made.  I just spoke with …….., the person whose name is on the letter that came with the reaffirmation agreement.  She says it is likely that (the bank holding the second mortgage) will resume sending monthly statements if they get a letter from me asking for that after the case has been discharged.  I will plan on doing that when that time comes.  I just put a note to myself on the front of your file to remind myself. 

We will no doubt go over all this and discuss it when I see you on …….. – after we’re done with the hearing.  There’s a conference room we can probably use at the courthouse, or we can go to the coffee shop on the main floor and talk there.

For now be sure you continue to make your car payments and the payments on both mortgages.  These creditors might stop sending monthly statements, but that doesn’t mean you don’t have to pay.  If you still want to keep the house and keep the car, you have to make the payments.  Every now and then I have a client who gets behind in the payments because the monthly statements stopped.  Don’t let that be you. 

Creditors like this usually resume sending statements after the discharge, either on their own or in response to a request.  After a bankruptcy the statements usually look a little different.  Somewhere on the bill they will say something like “We know you don’t owe this any more but we thought we would send this in case you still wanted to pay.  This is not an attempt to collect a debt.” 

Of course once you reaffirm (with the credit union holding the car loan) you will owe the debt again, so  their statements will look like they always did.

I didn’t get into it with this client, but the main reason I hate reaffirmation agreements is that they tend to defeat the whole purpose of the bankruptcy, which is to make debts go away and stay gone.  Even with a car loan, where technically the creditor does have a right to repossess just because the debt was not reaffirmed, I try to avoid having my client sign.  I make it my practice to call the lender and ask what they will do if my client does not reaffirm but continues to make payments.  If a reliable person speaking on behalf of the lender says the lender doesn’t  care about the reaffirmation as long as the payments continue to be made, I will tell  my client that I think he or she can get along without the reaffirmation and my advice is don’t sign it.

I found myself inserting “in Minnesota” several places above, because I want it to be clear that what I am saying may not apply in another state.  While bankruptcy is based on a federal statute that is supposed to apply nation wide, the law incorporates and relies a lot on local laws and local practices.  If you are not a resident of Minnesota, please ignore and do not rely on anything said here.  You need to consult a lawyer in your own state and your own community about matters like this.

This post is for general information purposes only, is not legal advice and does not create an attorney-client relationship. Please consult the attorney of your choice concerning the details of your case.

 

 

Those Troublesome Timeshares

A vacation timeshare can become like a stone around your neck.  I would say if you are thinking of getting one, don’t.

Vacation Timeshares can be like a stone around your neck.
A vacation timeshare can be like a stone around your neck.

A while back I heard from some people  I had done a Chapter 7 bankruptcy for in 2006.  After hearing nothing for years, out of the blue they were being sued for dues and maintenance fees by a timeshare company. The vacation  timeshare was owned at the time of filing the bankruptcy.  My clients were asking me the obvious questions:  Wasn’t that taken care of when we filed the bankruptcy?  How can they be suing us now?

Timeshares are unusual animals and a bankruptcy discharge might not apply to the maintenance fees and ownership association dues which accumulate AFTER the filing of the bankruptcy.  Any fees owing from before the filing of the bankruptcy would, however, ordinarily be discharged.

When it comes to fees which accumulate after the filing, the reason they might not be dischargeable is a provision among those that Congress added to the bankruptcy code in 2005, Section 523 (a) (16).  If you go here you can see it, just scroll down to (16).  This was written mostly to apply to condo and homeowner association fees, but it also says “in a share of a cooperative corporation … for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation or such lot …”

Some timeshares involve real estate ownership and are a version of a condominium or townhouse setup.  Others are cooperatives that own the property and the customer gets a membership in the coop.  If you have either of these, you are probably liable for the fees which are accumulated AFTER the bankruptcy filing and continue to accumulate until you are no longer an owner.  This is or can be a terrible spot to be in, because many of these places have quit trying to take back the units when they are not being paid for.  Most of them are worth little or nothing and can’t be sold.  A timeshare owner might be stuck with it indefinitely.

However, if you merely have a contract that gives you a license to use the facilities during a certain time, without any sort of ownership of the property, then liability for the fess would probably not continue after the bankruptcy filing.  The bankruptcy should kill it for good.  So exactly how the timeshare is set up makes a big difference.   I have looked over many stacks of timeshare documents, some of them even in foreign countries.  Those papers tend to be very hard to wade through, very hard to figure out.  I can read and write, and I even went to law school, but sometimes it can be hard to figure which category a certain timeshare setup belongs in.

If you have a timeshare of any kind and are considering bankruptcy, be sure to tell your lawyer all about it. If you can sell it before filing the case, you probably should.  Make your best effort to figure out whether it has a market value and what that is.  Provide your lawyer with all the paperwork you may have about it.  Make sure it is properly listed and properly described in your bankruptcy petition, and make sure that whoever is running the organization gets notice of your bankruptcy filing.

Then cross your fingers, hold your breath, or better yet –  pray a lot.  Hope the darn thing goes away.

As with any other financial matter, if you are considering a bankruptcy, don’t make any serious moves without consulting your attorney first.

This post is for general information purposes only and is not legal advice.  It does not create an attorney-client relationship.  If you need legal advice, please consult the attorney of your choice. 

Paying Off Student Loans with Credit Cards – Bad Idea

 

Here’s a link to an interesting article from creditcards.com discussing possible consequences of paying off student loans with credit cards.  I’ve never met anybody who tried it, or at least admitted trying it.  The trouble with replacing old debt with new debt is that any debt you run up right before filing a bankruptcy is very likely to be considered fraud.  The creditor gets to object and can prevent the discharge of that particular debt.
Also watch out for paying tax debt with credit cards.  The 2005 law says that if you transfer a tax debt to a credit card, it remains non-dischargeable.

http://www.creditcards.com/credit-card-news/paying-off-student-loans-credit-cards-bad-idea-1282.php

Moving to New Location Today

Anyone who has spoken with me over the past few months knows that I have been moaning and complaining about how my landlord was selling out to a developer and the building containing my office is scheduled to be torn down.  My beautiful office being destroyed.  It saddens me.

As of this morning, however, the moving truck is on its way and I hope to be unpacking at my new location as of late this afternoon.  The telephone and internet man is not coming until tomorrow morning, however, so that means that communications via my land line may be disrupted for a while.  If you need me the best bet will be to call  my cell – 612-735-3797.

The new location will be 11900 Wayzata Blvd. #116E, Minnetonka, MN 55305.  This is on the frontage road on the north side of 394 between Hopkins Crossroad and Ridgedale Drive.  It’s about a block east of the Staples store.  The office complex is called Marsh Run.

As many of you know, my old office had a patio and a back yard – something that an office would not ordinarily have.  For an office it was wonderful, and I loved it.  I didn’t think I would ever find any kind of an office space even close when it came to an amenity like that.  But I have managed to find something that has some similarity in that regard.  The new office actually has a deck that overlooks a little pond.  As far as the view goes, it is actually better  than the old office.

I’m going to be pretty distracted with moving and getting unpacked for the next few days; but taking  care of my clients and taking care of business has priority.  Everything that needs immediate attention will be taken care of.  As I said, if you need me just call my cell:  612-735-3797.