Multiple Bankruptcy Filings

A myth exists that states you can only file bankruptcy once in your life.  That is simply untrue and for good reason.  One may have multiple bankruptcy filings.  Bankruptcy is meant to allow the honest but unfortunate citizen a means of getting back on his or her feet.  This benefits the citizen, his or her family, and society as a whole.  The average person may go through multiple “bankruptcy-causing” events throughout his or her lifetime.

Bankruptcy-causing Events

When you think about consumer debt and bankruptcy, you might imagine some person who just goes on shopping sprees with no ability or intention of repaying the debt.  However, the real reason that most Americans end up filing bankruptcy has nothing to do with self-indulgence or an inability to resist temptation.

Medical Expenses

A Harvard University study indicates that unpaid medical bills are the leading cause of bankruptcy.  Rare or serious illness, catastrophic injuries – none of us are immune to these events.  Moreover, that study showed that 78% of filers actually had health insurance.  So this wasn’t a case of “well that person should have had insurance” – the majority of them did.  The unfortunate truth is that we all may be one accident or one illness away from bankruptcy.

Reduced Income or Job Loss

The Number Two spot goes to a decrease in income or loss of employment.  Companies now face a global economy with more and competition and automation.  That means they need to cut down on costs and, for many companies, the biggest expense line-item on their balance sheet is “payroll”.  Again, just like catastrophic medical events, you typically have no control over whether your employer is going to fire you.

Divorce

Generally, while you are married, you enjoy the benefits of what is referred to as “economies of scale”.  Simply put – you only need one roof over a married couple’s head – not two.  You only need to pay one cable bill, one electric bill, or one internet bill.  Once you split up and move into separate residences, those expenses typically double.  More specifically, divorce is expensive.  Divorce attorneys are expensive, trial is expensive and living off of one income where once there might have been two is expensive.  Many times, I see instances where couples get divorced and then each spouse files bankruptcy within a matter of months.  The burden is simply too much to handle without the contribution of the other spouse.

Multiple Bankruptcy Filings

Now circle back around to the beginning of this article.  How many co-workers, friends or family members do you know that have been affected by one or more of these life-changing events?  Moreover, life is usually not predictable or convenient.  You may lose your job this year, file bankruptcy and then end up getting divorced five years later.  You may encounter multiple catastrophic medical events throughout your life.  If you cannot afford to deal with the debt that results from each of these events, what else are you supposed to do?

Again, bankruptcy is for the honest but unfortunate citizen.  Sure, you hear ridiculous stories about how some random (nameless) person filed bankruptcy and got to keep a Rolex or a Rolls Royce.  Those stories are usually half-true and don’t really present all the facts necessary to truly understand how that conclusion was reached.  The majority of bankruptcy filings are done by hardworking Americans who just ran into some bad luck.  I know I’ve had some bad luck before – you probably have, too.  Don’t let it define you.

History of Bankruptcy

The History of Bankruptcy hearkens all the way back to Ancient Greece.  Actually, the word “bankruptcy” comes from the combination of the Ancient Latin words “bancus” (bench or table) and “ruptus” (broken).  It was commonplace for bankers to conduct business in the village square on a small bench.  If, for whatever reason, you had to shut your business down, you broke your bench in two as a symbol to the community that you would no longer be in business.

In Ancient Greece, if you could not pay your debt, your creditors forced you, your wife and even your children, into “debt slavery”.  “Debt slavery” was a limited form of real slavery that lasted for five years and then you were released by your creditor.  Time and society progressed.  Reading the Old Testament, we know that every seventh year was decreed a “Sabatical” year. or “Year of the Jubilee”.  During each Sabatical year, all members of the Jewish community (but not gentiles) were required to release all debt and debt slaves held by one another.

Medieval and Renaissance Influences on Bankruptcy

In 1542, in England, Henry VIII passed what are considered the first official laws codifying the concepts of bankruptcy.  Shortly thereafter, concepts such as disclosing all of you assets for orderly liquidation (auction) started to take hold.  In the eighteenth century, you were finally able to discharge of all debts that you were not able to pay. It rewarded debtors who truthfully disclosed all of their assets and debts with the ability to obtain a fresh start and move on with life (similar to modern Chapter 7 Bankruptcy).

The History of Bankruptcy in the United States

Similar to the English system, the Bankruptcy Act of 1800 in the United States was very creditor-oriented and only permitted involuntary bankruptcies of merchant debtors.  Individual debtors possessed no right to file bankruptcy on their own.  However, some clever debtors figured out that they could ask a friendly creditor to file the bankruptcy case.  Unfortunately, the bottom line was that you yourself were still beholden to the banks and lenders.

Evolution of Modern Bankruptcy in the United States

Over time, more and more bankruptcy developments emerged in favor of the individual debtor.  These developments culminated with a 1934 U.S. Supreme Court decision that stated that bankruptcy should provide “the honest but unfortunate debtor a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”  To this day, that sentiment still holds true.  Bankruptcy is for the honest but unlucky American.  You should not have to suffer for the rest of your life because of bad luck.

Contact The Law Offices of Dax J. Miller, LLC

If you have questions about debt and bankruptcy, contact The Law Offices of Dax J. Miller, LLC today.

You May Discharge Student Loans Through Bankruptcy

The general rule is that student loans are not dischargeable in bankruptcy.  In order to discharge student loans in bankruptcy, you must satisfy the Brunner Test.  The Brunner test requires that you must demonstrate that (1) you cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for yourself and dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that you have made good faith efforts to repay the loans.

However, more and more case law is developing that indicates that the tides may be turning on not being able to wipe out student debt in bankruptcy.

New Student Loan Case Law

Thankfully, recent judicial opinions have come out in favor of narrowing the classification of what constitutes a “student loan”.  In Essangui v. SLF V-2015 Trust, a debtor took out a private student loan.  She used that money to pay for tuition, books, and supplies at a Medical Education Readiness Program (MERP).  Subsequently, the Court found that just because you take out a student loan and use it for educational expenses, it doesn’t mean that you are automatically denied the possibility of discharge in bankruptcy.  The court concluded that “the language of the statute suggests that Congress worked to strike a delicate balance between the fresh start policy for debtors and the protection of certain educational programs and lenders offering loans for such programs”.

In ECMC v. Murray, the court actually stated that “in the interest of bankruptcy’s commitment to providing debtors a fresh start, that the [Brunner] test should not be applied too restrictively”.  Fortunately, the court even went so far as to say that just because the debtors were able to afford an income-based repayment (“IBR”) plan, didn’t mean they were stuck with their student loans.  The court recognized that by the debtors only making the payments under the IBR, their student loan principle balance was actually increasing, not decreasing.

Get Rid of Student Loan Debt

Unfortunately, Evansville Bankruptcy Lawyers may immediately shy away from the question of “can I get rid of student loan debt in bankruptcy?”.  At The Law Offices of Dax J. Miller, LLC, we review each case to determine whether you may potentially discharge some, if not all, of your student loans.

If you have questions about student loan debt, contact The Law Offices of Dax J. Miller, LLC today.

The average American’s debt hits records levels this year. The previous record holder was a collective $1.02 trillion in 2008 just before the Great Recession. The average American’s debt has now hit a collective $1.021 trillion – the highest it has ever been.

Average American’s Debt Hits Record Levels

We should all treat this as a huge wake-up call. Higher debt levels increase the risk of default when borrowers cannot service the debt. Current interest rates are also historically low resulting in easy access to credit. For the first time since the Great Recession, lenders are offering consumers with poor credit scores record amounts of credit. Each of these phenomena point to one conclusion – another recession is coming. It is just a matter of when.

Differences in Debt Types

One large difference between 2008 and today is that the debt type is different. Ask anyone “what was at the crux of the 2008 crash?” and they will tell you “the real estate market”. And they would, for the most part, be correct. However, today’s debt looks much different. Housing-related debt is now down; however, student loan debt is up $671 billion and auto loans are up $367 billion. Multiple factors such as the decrease in the perceived value of home-ownership and an increase in the cost of higher education contribute to this new mix of debt type.

What is the Solution?

Needless to say, there is no silver bullet. Each individual’s situation differs. Some may need to simply cut back on non-essential spending (eating out, online shopping – sorry Amazon). Others may need to investigate more acute solutions such as debt settlement or credit repair. In many cases, either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy may eliminate most, if not all, of the debt. Which option best suits you is going to depend on a number of factors. The most important questions to consider are: are you currently delinquent; how much debt do you have; what assets do you own and what are they worth; and how much money do you make?

If you have questions about debt or bankruptcy, contact The Law Offices of Dax J. Miller today to learn more.

Bankruptcy is good social policy.

There are many myths surrounding bankruptcy.  People think that you can just run up a bunch of debt, file a bankruptcy and walk away scot-free.  That is far from the case.  The bankruptcy code contains numerous provisions to explicitly prevent abuse.

Bankruptcy abuse prevention

For example, the bankruptcy code’s “means test” is a formula to prevent those who can repay their debt from just discharging it in a Chapter 7 Bankruptcy.  If you don’t pass the means test – no Chapter 7.  Your only other option then is Chapter 13 Bankruptcy where you are required to repay a portion of your debt.  Another example comes in the form of bankruptcy code exemptions.  Exemptions are the “asset protection” tool of the bankruptcy code.  They allow you to protect a certain dollar amount of your personal property.  However, you cannot purchase lots of luxury goods on credit and then file bankruptcy to wipe out the debt yet keep the goods.  The bankruptcy trustee has the right to seize those goods and sell them at auction to obtain funds to repay some of your creditors.

Bankruptcy is for the honest, but unfortunate debtor.

Like many things in life, a couple bad apples tend to spoil the bunch.  The general public only hears the bankruptcy horror stories.  You don’t hear about the tens of thousands of bankruptcies filed that result in people rightfully discharging debt and moving on with their lives.  You hear tales of people losing everything and bankruptcy ruining their lives.  Those tales are the exception, not the rule.  Also, if you looked closer at those horror stories, you will inevitably notice that the person filing did something dishonest or something they weren’t supposed to.  A well-executed bankruptcy achieves the desired result 99% of the time.  The most often comment I receive from clients after they finish their bankruptcy is that they wish they had done it sooner.

If you have questions about bankruptcy or just debt in general, contact The Law Offices of Dax J. Miller today for your free consultation.

Hot Yoga Files Bankruptcy

That’s right – the company that brought hot yoga to the U.S. files for Chapter 11 Bankruptcy after the founder’s sexual harassment scandals cost the company millions.

Chapter 11 Bankruptcy Due to Chapter 13 Debt Limits

Chapter 11 Bankruptcy applies to business entities like corporations. Chapter 11 Bankruptcy can enable a corporate debtor to reorganize its debt.  Chapter 11 Bankruptcy is also an option for individuals with so much debt that they are barred from filing Chapter 13 Bankruptcy.  Chapter 13 Bankruptcy contains “debt limits”.  One may not have more than $394,725.00 in unsecured debt and $1,184,200.00 in secured debt to qualify for a Chapter 13 Bankruptcy.

Bankruptcy May Not Save Hot Yoga

Bikram Choudhury Yoga Inc. listed over $16,000,000.00 in debt.  Much of that debt resulted from lawsuits that contained allegations of sexual abuse or assault.  The Bankruptcy Code states that some forms of debt are generally nondischargeable.  Debts like child support, alimony, and student loans are usually nondischargeable.  However, the Bankruptcy Code also contains a provision that states that a debt may be nondischargeable if they result from “willful and malicious injury by the debtor to another entity or to the property of another entity”.

Other Examples of “Willful and Malicious Injury”

Bankruptcy Courts have established numerous examples of what constitutes a “willful and malicious injury”.  Notably, one case involved an instance where the Debtor broke the creditor’s arm and then bit part of his finger off.  Other Courts have found that defamation may constitute “willful and malicious injury”.  However, the most common instances of “willful and malicious injury” usually also involve allegations of fraud.  The Bankruptcy Code separately lists “fraud” as a basis for nondischargeability.  This means that the creditor two separate avenues to obtain a ruling of nondischargeability.

Is My Debt Able to Be Discharged in Bankruptcy?

Naturally, if you are concerned about a specific debt, you need to seek answers.  Contact The Law Offices of Dax J. Miller, LLC to learn more about which debts you can eliminate and which ones you can’t.

Paying Off Student  Loans Early May Be a Big Mistake

Student Loans Start Off Well-intended

Student loans are great.  They allow you to seek out your dreams and pursue your passions.  Most importantly, they enable you to earn more money so you can provide a better life for yourself and your family.  But student loans come at a cost – literally.

Student Loans – The Cost

The average student in the class of 2016 had $37,172.00 in student loan debt.  That’s a down payment on a house or a brand new car.  If you’re actively repaying those student loans, you are not buying a new car or putting a down payment on a new house.  That means there is one less car being made and a whole slew of professions/industries that aren’t benefiting from a new house being purchased (construction, appliances/electronics, roofers, lawn care, etc.).  When you spend money, other people around you make money – then they spend money and other people around them make money.  Its not rocket science.

Student Loan Payments Leach From the Economy

However, when you have a whole swath of the wage-earning American population spending huge portions of their income to repay student loans – that money goes nowhere.  Correction – it goes to the federal government – which might as well be nowhere.  That money then gets folded back into the federal budget to get spent on projects like solar-powered beer, llama farmer regulations, or the search to find North Carolina’s best fiddler.

Ok – What’s the Solution?

The solution to the student loan problem may be this – don’t pay them.  Well, don’t pay all of them.  Current legislation says that if you use a certain type of repayment plan through the William D. Ford Program, then you may be eligible to have your student loans forgiven after 25 years of payments.  That may seem like a long time.  However, if you cannot afford your current student loan payments, you may want to learn more.  If paying your student loans are preventing you from making the major life purchases (a house, a new car, a nice vacation), then you may want to learn more.  If you simply want to minimize the amount of money you give Uncle Sam and maximize the amount of money you get to keep, you may want to learn more.

Learn More

Contact The Law Offices of Dax J. Miller, LLC today to learn how we can help you manage your student loans.  If you qualify, we may be able to help you get a lower payment and, eventually, get those student loans forgiven.

 

 

How Long Does Bankruptcy Stay on Your Credit Report?

How long bankruptcy stays on your credit report is a factor to consider prior to filing bankruptcy.  Your credit report is important when it comes to financing a car or a house.  Understanding how bankruptcy may affect your credit is key to knowing what to expect after bankruptcy.  Generally, federal law (the Fair Credit Reporting Act) dictates that credit bureaus may not report bankruptcy on your credit for more than 10 years from the date of filing.

How Long Does Chapter 7 Bankruptcy Stay on Your Credit Report?

Chapter 7 Bankruptcy stays on your credit for 10 years from the date of filing the bankruptcy.  Your credit report will read something similar to “Discharged – Chapter 7 Bankruptcy”.  However, you can obtain credit almost immediately after your receive your Chapter 7 Discharge.  You typically receive a Chapter 7 Discharge about 4 to 6 months after your Chapter 7 Bankruptcy is filed.  The old myth that “you cannot get credit for at least 10 years after bankruptcy” is just that – a myth.

How Long Does Chapter 13 Bankruptcy Stay on Your Credit Report?

Federal allows the credit bureaus to leave Chapter 13 Bankruptcy on your credit report for up to 10 years.  However, the major credit bureaus (Equifax, Experian, Transunion) choose to remove Chapter 13 Bankruptcy from your credit after 7 years from the date of filing.  They do this to incentivize consumers to file Chapter 13 (instead of Chapter 7) and attempt to repay some of their creditors.  Once you receive your Chapter 13 Discharge, your credit report will read something similar to “Paid as agreed – Chapter 13 Bankruptcy” or “$0.00 – Chapter 13 Bankruptcy”.

What Does Having Bankruptcy on Your Credit Mean?

Again, just because your credit report lists a Bankruptcy does not mean you cannot obtain credit.  It is just a way to give potential lenders notice that you file on a give date.  It will also tell those potential lenders what types of debts were included in the Bankruptcy.  The lenders use this information in two ways:  1.  They use it to determine whether to offer you credit and how much to charge you in interest; and 2.  They see that Bankruptcy date and know that they are safe because they know you cannot file bankruptcy again without waiting several years (depending on the type of bankruptcy you file).  Naturally, having a single Bankruptcy on your credit is better than having numerous past due credit card or collections account.  Plus, it shows that you take responsibility for your finances instead of just ignoring them.

Read “How Does Bankruptcy Affect My Credit Score?” to learn more or….

If you have questions, act now.  

Contact your local Evansville Bankruptcy Lawyer at The Law Offices of Dax J. Miller for free unlimited consultations.

How Does Bankruptcy Affect My Credit Score?

Generally speaking, most people try to protect their credit score.  Having a decent credit score allows you to finance a home, a car – any expense you cannot afford to pay for all up front.  But what if you are considering bankruptcy?  How will bankruptcy affect your credit score?

Bankruptcy May Positively or Negatively Impact Your Credit Score

Everyone assumes that filing bankruptcy is a death knell to one’s credit score.  That is rarely the case.  Consider the following examples:

Example:  Bob Smith

Bob Smith lost his job about six months ago.  He is in an industry where he knows it is going to take 4 – 6 months to find another decent paying job.  He has been trying as hard he can to find another one – he just can’t.  As a result, all of his medical bills have gone into collections, his credit cards are behind and he even lost a car to repossession.  About 30 different bill collectors call Bob everyday demanding payment.  Bob is now getting sued in Court.  Bob’s credit is probably sitting right around 450 or so.  Bob has gone to numerous banks to try to get a car loan so he can get transportation so he can get a job.  The banks won’t touch Bob because of his credit score.

Bob files bankruptcy.

After Bob’s bankruptcy is over, Bob’s creditors are now forced to report “Discharged in Chapter 7 Bankruptcy” on his credit report.  Now, when Bob goes to get that bank loan, the bank knows that all of the bad debts that used to be on Bob’s credit are now gone.  The bank knows that those creditors cannot collect on those old debts – that makes the bank feel more optimistic about actually receiving their monthly payments from Bob going forward.  Moreover, the bank knows that Bob cannot file another bankruptcy for quite some time (up to 8 years in some instances).

As far as Bob’s credit score goes, bankruptcy generally affects your score like this:

If you have really good credit, like an 850, your score will likely come down 100 – 150 points.

If you have an average score, like a 650, your score will likely fluctuate up or down by about 50 – 100 points.

However, if you have a poor score, like Bob’s 450, your score will likely increase by 75 – 150 points just because you are almost immediately eliminating all of that ongoing negative reporting to your credit.

Example:  Robert Smythe

Robert has had a great job for 15 years.  He has a perfect 850 credit score.  However, Robert just found out that after 15 years, he is being let go with no notice.  Robert is also in an industry where he knows it is going to take 4 – 6 months to find another decent paying job.  Robert does not have the savings to service all of his debt during that 4 – 6 months.  He knows, as a certainty, that bills will not get paid and his credit will begin to suffer.

While Robert is not currently behind on anything, he knows its coming.  He bites the bullet and files bankruptcy.

Robert has avoided the inevitable negative reporting to his credit.  He has avoided the phone calls, the collections letter, the lawsuits and being turned away by potential lenders.  Yes, Robert’s credit score of 850 has fallen to around a 700.  However, had Robert not acted when he did, all of those creditors would have started negatively reporting.  Robert’s score would have gone from an 850, down to a 750, down to a 650 – and, before you know it – Robert and Bob would have been right there together sitting at a 450.

The bottom line is that filing bankruptcy is not the end of your credit.  Usually, it’s just the beginning.

Check your credit score for free here and then act now. 

Contact your local Evansville Bankruptcy Lawyer at The Law Offices of Dax J. Miller for free unlimited consultations.

 

Chapter 13 Bankruptcy Claims Process

Chapter 13 Bankruptcy is reorganization bankruptcy.  It allows one to obtain the protection of the bankruptcy code in order to restructure one’s debt in a more manageable, affordable way.  Clients file Chapter 13 Bankruptcy for a number of reasons.  Some file to save a house or car from repossession or foreclosure.  Some file to reorganize state or federal tax debt.  Others file to reorganize credit cards, collections, medical bills and even student loan debt.

How Do My Creditors Know I Filed Bankruptcy?

When your attorney creates your bankruptcy petition, the Bankruptcy Code requires you to list each creditor to which you might owe money.  Then, once we file your case, the Bankruptcy Court sends out notices to to each of your creditors informing them of the bankruptcy.  The notice contains your name, address and social security number to better assist the creditor in identifying your account.

Claims Deadline

This notice also gives the creditor a specific deadline by which it must file a claim in your case.  This deadline is 70 days from the date of your case was filed.  However, governmental units (IRS, Indiana Department of Revenue, etc.) are permitted a full 180 days from the date your case was filed.  So – 180 days from filing for the government and 70 days from filing for everyone else.

Objecting to Claims

After the claims deadline passes, the Chapter 13 Trustee and your attorney have the opportunity to review each claim.  Each claim must comply with the Bankruptcy Code in order to be deemed a valid, payable claim.  If a claim does not comply with the Bankruptcy Code, both the Chapter 13 Trustee and your attorney can object to it.  The objection must cite with specificity the reason why the claim is invalid.  If the creditor fails to respond to the objection within 30 days, the Court will rule in your favor.

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