Extra Money Doesn’t Come Around Often…

If you are in debt, filing bankruptcy with your tax refund gives you the relief you need now. Take this opportunity to get of debt and back on track for 2019. Stop worrying about how to pay medical bills, credit cards and collection accounts. File bankruptcy to stop garnishment, repossession and foreclosure.

Filing bankruptcy at tax time allows you to set the stage for the rest of the year. Don’t spend 2019 worried about bad credit and overwhelming debt. Take control of your financial future now. Don’t spend another year getting garnished or watching your credit fall. If you’re reading this now, you’ve already taken the first step. The good news is that you’ve come to the right place.

Timing Is Everything…

The bankruptcy code contains very specific laws concerning how the court treats your tax refund. In most cases, you don’t lose any of your tax refund money when you file bankruptcy. However, that is largely dependant on how you plan prior to filing bankruptcy. Speak to The Law Offices of Dax J. Miller today to make sure you protect your tax refund in bankruptcy.

File Bankruptcy With Your Tax Refund

The bankruptcy court allows you to use your tax refund to pay bankruptcy attorney fees. While there are some expenses you cannot use your refund for, paying your bankruptcy attorney and your court filing fees is permitted. The Law Offices of Dax J. Miller offers discounts for the those using their tax refund to file bankruptcy this year. If you file your bankruptcy by April 15, 2019, you will enjoy discounted bankruptcy fees. File your tax return and contact The Law Offices of Dax J. Miller immediately to find out whether you should file bankruptcy before or after you receive your tax refund. If you already filed your taxes, go here to check the status of your refund.

To rebuild your credit after bankruptcy, you must retrain your financial behavior.  This starts with recognizing the fact that you must live with the lifestyle that your income allows.  This does not necessarily mean you cannot have nice things or go out to eat or go on vacations.  It is simply a restructuring of your overall priorities to ensure future financial well-being.

How to Rebuild Your Credit After Bankruptcy

The thought of rebuilding your credit after bankruptcy may seem overwhelming.  The key is to begin with small, easy-to-complete tasks and then work your way up the ladder.  Understanding how bankruptcy affects your credit will allow you to begin to rebuild your credit after bankruptcy.

Rebuild Your Credit After Bankruptcy – Step One

The first step is to ensure that all of the creditors whose debt you discharged are correctly reporting to your credit.  You should familiarize yourself with www.annualcreditreport.com.  This is the free, government-sponsored website that allows you to pull each of your credit reports once a year.

I recommend picking one report and pulling it about 60 days after you receive your bankruptcy discharge.  Each of the discharged debts should now be reporting “$0.00” or “Discharged in Ch. 7 Bankruptcy.”  If any debt is not reporting that way, contact our office right away.  Please make sure to download or print off a complete copy of the credit report.  We can then determine whether this is something that simply needs to be disputed with the credit bureau OR if we need to reopen your bankruptcy case and seek sanctions against that creditor.

Once we determine that all of the creditors are correctly reporting the bankruptcy, the next step is maintenance/monitoring.

Rebuild Your Credit After Bankruptcy – Step Two

You can choose from any number of credit report companies to monitor your credit score these days.  My favorite is Credit Karma.  It is legitimately free to sign up.  More importantly, Credit Karma constantly rates each of the factors that make up your total credit score.  The site will actually tell you what you can do to improve your credit card utilization rate, hard inquiries, payment history, and derogatory remarks.

Naturally, Credit Karma is available as an app on just about any cell phone carrier so you can always be in touch with how your score is doing.  If you’re like me, you may just become obsessed with it and check it weekly or even daily.

Rebuild Your Credit After Bankruptcy – Step Three

Obtain a secured credit card.  A secured credit card is identical to a regular credit card with one important difference.  With a secured credit card, you give the credit card company a deposit before they issue you the card.

Example:  You give Big Credit Card Company $200.00 that you have saved up over the last couple of months.  Big Credit Card Company says “thank you” and puts that money into a separate account that only they control.  Big Credit Card Company then issues you a credit card that has a $200.00 spending limit.

You then use this credit card just like you would any other card.  You charge expenses to it and then pay them off on a monthly basis.  Every time you make a timely monthly payment, Big Credit Card Company reports positively to your credit.  Every positive report to your credit further boosts your credit score.

Here is the beauty of a secured credit card – they will never report negatively to your credit.  Say you miss a payment or just stop paying the card altogether.  Big Credit Company will just start to deduct whatever monthly payments you don’t make from the $200.00 that you’ve already given them.  They will do this until that account is totally depleted.

By having those funds already on hand, you’re ensuring that you’re never in a position where you might get in over your head.  You are also ensuring that they will not report negatively to your credit.  It is a win-win for you and Big Credit Card Company.

Rebuild Your Credit After Bankruptcy – Step Four

The key to rebuilding your credit after bankruptcy is incurring debt and then paying it off in a timely manner.  Once you are comfortable with your post-bankruptcy finances, you may consider financing a car or home.  As with any other purchase in life, the best way is pay for the item with cash up front.  You should avoid financing items where you can.  Unfortunately, there are times where that is simply unavoidable.

Financing a vehicle after bankruptcy is surprisingly easy.  Once you receive your discharge, you can walk into just about any dealership in the state of Indiana and finance a car.  I recommend going during “year-end clearance” sales because you have a better chance at getting a lower interest rate.

Financing a home after bankruptcy requires a little more time and savings.  If you are in the market for a new home and do not have a 20% down payment, you actually only have to wait two years from the date of discharge to be able to obtain the FHA home loan through the federal government. The FHA program requires you only put down 3.5%!

Rebuild Your Credit After Bankruptcy – Final Step

Don’t get discouraged.  Increasing your credit score will take time and patience.  Use it as an opportunity to learn more about how to budget and prioritize what you want out of life.  If you have questions or concerns, contact our office.

Discharging student loans in bankruptcy may get easier.

Student Loans Causing Undue Hardship

Currently, discharging student loans in bankruptcy requires you prove that they create an undue hardship.  Bankruptcy Courts struggled with how to define “undue hardship.”  You basically have to show that you cannot maintain a basic standard of living while paying the student loans and that this difficulty would last throughout a large chunk of your repayment period.

Undue Hardship Almost Impossible to Prove

That level of hardship has been virtually impossible to prove in Bankruptcy Courts.  The result is that many people who successfully filed a bankruptcy are still stuck with a debt that they have little or no ability to repay.  That then impacts the rest of the economy in that those people cannot buy cars, houses, or make other purchases that drive our economy as a whole.

Overwhelming Student Loan Debt

Student debt in the United States amounts to over $1.5 trillion.  That amount of debt is second only to mortgage debt in this country.  The Brookings Institute estimates that nearly 40 percent of all student loan borrowers will default on their loans by 2023.  This could spell catastrophe for not just those borrowers, but the economy as a whole.

Hope on the Horizon

The Department of Education indicated interest in broadening the definition of “undue hardship.”  An expansion of this definition would allow more student loan debt to get discharged through bankruptcy.  However, this is not simply a “get-out-of-jail-free-card.”  There are still very strict guidelines to be followed.  Notably, even a significant uptick in discharged student loan debt would pale in comparison to the total amount of student loan debt in the U.S. ($1.5 trillion).  The impact on the individual would be huge.  The impact on the student loan system as a whole would be small.

Discharging Student Loans in Bankruptcy

If you’re having trouble with student loans, you need to seek help as soon as possible.  When in default, student loans can garnish your paycheck and even seize your tax refunds.  Even current bankruptcy laws still permit you to get your student loans back under control.  Contact The Law Offices of Dax J. Miller, LLC today to learn how we may help you with your student loan debt.

Medical Bills Can Be Included in Bankruptcy

You can file bankruptcy on medical bills.  That’s right – put medical bills in bankruptcy.  While there is a common misconception that you cannot file bankruptcy on medical bills, it is simply not true.

Medical Bills with the Hospital

Fortunately, you can file medical bills in your bankruptcy even if they are still with the hospital.  You can even file them in your bankruptcy even if you haven’t received the actual bill yet.  The key to listing medical bills in your bankruptcy is making sure you disclose the name, address and approximately how much you owe to the hospital or health care provider.  The bankruptcy does the rest.

Medical Bills in Collections

If you have medical bills with a health care provider and you do not pay them, the debt will eventually end up with a collection agency.  Consequently, that collection agency will then report the account negatively to your credit report while they try to collect against you.  You will likely not even recognize the name of the company calling you to collect.  Some of the most common medical bill collections companies are:  Hoosier Accounts Service, Cash-Pro, Atlas Collections, and Medical & Professional Collection Services.

However, if the collection agency isn’t able to get you to pay voluntarily, they may then refer the account to a collections law firm who may then sue you.

Medical Bills with Collections Law Firms

Many people think you cannot be sued for a medical bill – this is not true.  You can definitely be sued for a medical bill.  Worst yet, the lawsuit process is extremely simple and streamlined.  Medical collections law firms often file hundreds of lawsuits in a single day in Southern Indiana.

If you have been served a medical bill collections lawsuit, you cannot afford to ignore it.  Ignoring the lawsuit will allow the creditor to obtain a default judgment against you.  The creditor may then use this judgment to garnish your wages, seize money in a bank account, seize vehicles and even foreclose on your home.

Medical Bills – The Takeaway

I am not writing this to scare you.  I am writing this to impress upon you the extremely serious nature of mounting medical bills.  Unfortunately, many of us are just one injury or serious illness away from bankruptcy.  It can happen fast and without warning and if you do not act to protect yourself, you may find yourself in serious financial trouble.

Limits on Garnishment

If you are currently being garnished, the first you need to know is whether there is a limit on that garnishment.  Is the creditor taking too much?  Do they even have a right to garnish you at all?  What options do you have if you’ve been hit by a garnishment?

Garnishment Defined

A “garnishment” occurs when one of your creditors sues you, wins, and then gets the court to take part of your wages to satisfy the debt.  Unless you file bankruptcy or convince the judge why a lesser amount should be allowed, the creditor may be able to take up to 25% of your disposable income or the amount of the disposable earnings that exceed 30 times the federal minimum hourly wage – whichever is less.

Who can garnish my wages?

Virtually any type of creditor possesses the ability to garnish your wages.  Banks or credit unions, credit card companies, and, most commonly in Southern Indiana, medical bill collectors all enjoy access to the same legal framework that allows them to garnish your wages.  Shockingly, the Consumer Financial Protection Bureau released a report in 2014 showing that 43 million Americans have unpaid medical bills on their credit reports.

In the event child support or alimony is owed, the creditor can be a legal guardian or ex-spouse.  Moreover, a child support or alimony creditor may garnish up 65% of your wages for payment of past due child support or alimony.

What constitutes wages?

“Wages” initially meant money that you received from your pay check.  That term has evolved to apply to whole range of types of income.  “Wages” is currently defined by the Indiana Legislature as “wages, commissions, income, rents, or profits remaining after the deduction from those earnings of amounts required by law to be withheld”.

Federal and state courts have further expanded and limited the applicability of this wage garnishment statute.

Example of expansion of state wage garnishment statute

When the statute was first enacted into Indiana state law, creditors disputed that it applied in bankruptcy proceedings.  Hypothetically, debtors enjoyed more protection of their wages outside of bankruptcy than inside of bankruptcy.  Bankruptcy judges found this to inconsistent with the “spirit” of the state wage garnishment exemption so debtors can now exempt their wages within bankruptcy, too.

Many courts have also ruled that your creditor cannot use contempt against you as a way to force you to repeatedly attend hearings related to the garnishment.  The courts have held that this practice basically amounts to putting someone in jail because they owe money to a private creditor.

Example of limits of state wage garnishment statute

Multiple courts have found that the wage garnishment statute applies only in civil proceedings.  This means that if you are prosecuted criminally and ordered to pay criminal restitution to your victim or the state, the 25% cap on wage garnishment does not apply to you and you can be forced to pay more.  Bankruptcy can, however, reorganize that debt to allow you pay it off in a more manageable way.

Sole proprietorships also need to exercise caution where garnishments are concerned.  Courts have come out and said that if you are a sole proprietorship and you alone decide when and how much to pay yourself, then you don’t get that protection.  The court’s opinion did speculate, though, that if you could show a history of paying yourself on a schedule based on some predetermined formula that you would likely get to use the wage exemption statute.  The bottom line is that it needs to be a set periodic payment.

In that same vein, courts have also found that 1099 income paid out to subcontractors may qualify as wages.

Those in the education/teaching profession have also run into some (more) bad luck.  A recent ruling found that the escrow account set aside for some teachers who elect to be 12-month employees so they can get paid in the summer does not constitute “wages” and can be completely taken.

Bonuses and severance packages also fall into this category.  This is, again, because the court looks to determine whether the income is received “periodically”.  If not, then no exemption.

How to stop a garnishment?

The first and most obvious option is to just pay off the debt.  However, if that were really an option, you wouldn’t be reading this article to begin with.  The second option, which I don’t really consider an option at all, is to do nothing.  Sure, eventually you may pay off the debt and that one creditor won’t be garnishing you any more; but you won’t be able to pay your car note, or your rent or mortgage and then those fall behind and you’re in real trouble.  Also, how many other creditors will be waiting in the wings to swoop in with the next garnishment?  The last, least expensive and most effective option is bankruptcy.  Chapter 7 Bankruptcy or Chapter 13 Bankruptcy each have the power to stop garnishment and get you a fresh start.