Month: February 2020

How to Manage Your Student Loan Debts Using Chapter 13 Bankruptcy

Across the United States, an increasing amount of young people are graduating from universities heavily indebted with student loans. The total student debt in the country right now stands at an astonishing $1.5 trillion and the figure continues to rise rapidly. The current bankruptcy laws make it extremely difficult, if not impossible, to discharge your student loan debt.

However, that doesn’t mean filing for bankruptcy still won’t be worthwhile if you are struggling with repayments. Here is how to manage your student loan debts using Chapter 13 bankruptcy.

Benefit of Chapter 13

When you filed for bankruptcy, the court will immediately grant an automatic stay period that extends until the completion of the bankruptcy process. During the automatic stay period, all debt collection activity, including that of your student loan debt is prohibited, meaning you will not be harassed by your lenders to make regular repayments on your outstanding debt.

Instead, the court will create a new repayment plan for the duration of the bankruptcy (usually 3 to 5 years) based on your ability to afford. Since student loans are considered non-priority unsecured debts, you will not be required to repay the debt in full by the end of the duration.

Depending on your circumstances, the actual amount you would need to pay monthly could be significantly lesser. If the court determines that you have little or no disposable income than you probably won’t be required to pay any amount towards your student loan debts throughout the stay period.

A Word of Caution

Keep in mind that interest will still continue to accumulate on your student loans during the duration of the bankruptcy. In some cases, this could translate to a considerable amount you’ll have to pay back once the automatic stay period expires.

Another thing to be aware of is that the court’s meaning of “what you can afford” may differ from your own. It is not unheard of for filers to be given a plan which may heavily compromise their lifestyle. The aid of a seasoned attorney is vital to make sure the outcome is more in your favor.

Concluding Note

If you fail to repay your creditors on your student loan debts, the consequences could be terrible. It could severely hurt your credit score, you could be subject to a lawsuit, or have your wage garnished. Filing for Chapter 13 Bankruptcy can make repayments on your student loan debts much more manageable and help you avoid such predicaments.

More information on how the Federal Reserve’s recently lowered rates impact preexisting debt and refinancing options.

What Happens When You File for Bankruptcy Without Your Spouse?

When you file for bankruptcy without your spouse, how the debts and property you both share gets affected will largely depend on whether the state you reside in follow common law or community property system. In this article, I will briefly give an introduction to the two as well as explain how you and your spouse will be impacted under each when one of you files for bankruptcy.

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Map of the United States with States following the community property system in red and the common law property ones in grey. Note: In some grey states, such as Alaska, you are given the option to opt for into community property instead.

Community Property and Bankruptcy

Under community property law, unless agreed to otherwise, most assets are considered jointly owned by both you and your spouse. Therefore, when either one of you files for bankruptcy, the property will become part of the bankruptcy regardless of who owns the title.

However, there is an exception to this rule. Assets that were brought prior to the marriage or received individually through inheritance or gift can be legally maintained as separate and hence not liable when the other spouse files for bankruptcy.

In some community law states, including the State of Texas, it may be far more advantageous if you and your spouse file for bankruptcy together. By doing so, both of you can claim the full amount of exemptions and protect more of your joint assets from liquidation.

Regardless of whether you file for bankruptcy with or without your spouse, they will also have their debts discharged on joint assets on the conclusion of the process.

Common law Property and Bankruptcy

In common law property states, each spouse is a separate legal entity. Hence, when you file for bankruptcy in such states, only those assets you own the title to and have brought yourself will be considered liable under bankruptcy.

In case of titles jointly owned, both spouses are considered to have equal stakes unless agreed to otherwise and only your portion of the property becomes part of the bankruptcy. However, in cases where the property cannot be realistically divided, such as your house, the trustee will sell the whole property and pay your spouse their due share.

As previously emphasized, since both of you are separate legal entities under common law, your spouse still being liable for their debts once you get a discharge. In the case of joint debts, they will still responsible for their half of the outstanding amount.

Consider Hiring an Attorney

Going through the bankruptcy process can be a difficult and emotionally draining experience for both you and your spouse. But it doesn’t have to be. A seasoned lawyer can best help you navigate through the process and achieve outcomes more favorable to you and your spouse.

To schedule your free consultation with our office, feel free to call 512.640.3340 or contact directly online.

Can You Get a Mortgage After Bankruptcy?

When a consumer is overwhelmed with debt and can’t find a way to pay their creditors, they often file for bankruptcy. Filing for bankruptcy can give you some relief from debts and stop collection activities such as repossession and lawsuits. However, bankruptcy can seriously hurt your credit and would stay on your credit report for a while. Does this mean that you can’t qualify for a mortgage after bankruptcy? No, this isn’t the case. Many lenders have established guidelines for consumers who emerge from bankruptcy and complete the waiting period. In this post, we will explain how you can get a mortgage after bankruptcy.

How Your Ability to Acquire a Mortgage Is Affected by Bankruptcy

Bankruptcy can lower your credit score and affect your ability to get loans. Fortunately, its impact doesn’t last forever. Before you can apply for a mortgage, your bankruptcy should be discharged. The court orders a bankruptcy discharge, and it eliminates your debts. The lender will want to see that your bankruptcy is discharged, and they will also look at your credit to determine whether you can qualify. There is also a waiting period that must be completed before applying for a home loan after bankruptcy. This period varies depending on the type of home loan you are applying for.

Waiting Periods

Waiting periods start once the bankruptcy is dismissed or discharged, meaning that the case is over, and you will be paying your debs without a bankruptcy payment plan. For Chapter 7 Bankruptcy, the waiting period is calculated from the dismissal or discharge date of the bankruptcy case. For Chapter 13 Bankruptcy, the waiting period for bankruptcy that is discharged isn’t the same as the bankruptcy that was dismissed.

Chapter 7 bankruptcy is removed 10 years after the date of filing, while Chapter 13 bankruptcy is removed seven years after the filing date. Credit reporting agencies normally delete bankruptcy from the consumer’s credit report after 10 or 7 years. However, it is still a good idea to check your report to ensure that there is no bankruptcy on it.

Waiting Periods of Different Home Loans

For Chapter 7 bankruptcy, the waiting period of conventional loans is 4 years, FHA loans’ waiting period is 2 years, that of the USDA loans is 3 years, and VA requires consumers to wait 2 years after the discharge or dismissal date.

For Chapter 13 bankruptcy, conventional loans’ waiting period is 2 years from the discharge date and 4 years from the dismissal date. FHA loans, USDA loans, and VA loans require consumers to wait at least a year after the discharge or dismissal date.

Final Thoughts

Getting a mortgage after bankruptcy isn’t an easy feat. But, if you are discharged from bankruptcy, wait for the required period and develop a good credit after bankruptcy, you may still be able to get a home loan.

Can I Keep My Business if I File For Chapter 7 Bankruptcy?

When you are struggling under mountains of debts, filing for Chapter 7 bankruptcy may be a worthwhile option to regain your financial footing with a clean slate. However, the process does run the risk of having your assets liquidated to repay your creditors the debt’s outstanding amount. Many past clients have often asked if they can keep operating their business in Chapter 7 Bankruptcy. The answer is that it depends. Continue reading for more details.

Bankruptcy Exemptions

Under Federal and State Law, you are allowed to exempt (protect) certain properties from being liquidated during a bankruptcy process. Unfortunately, it can be extremely difficult to have your business assets exempted in most states. For example, in Texas, business assets are not including in any of the state’s exemption categories.

In Federal law, there is an exemption category called “Wild Card”, which allows you to exempt any of your assets, regardless of type. Its use in the case of protecting most business assets is very limited. As of the time of this writing, the exemption value under a Wild Card is just $1,325 plus up to $12,575 of any unused portion of the federal homestead exemption.

Your Business Type and Chapter 7 Bankruptcy

What actually happens to your business during a bankruptcy process will be largely determined by the legal nature of your business. Here are some common business types and how their assets are handled by a bankruptcy trustee.

Sole Proprietorships

In the case of sole proprietorships, all your business assets will be dealt with as if they were your personal assets. The trustee may sell off your business and use the proceeds to pay back your creditors.

However, in case of sole ownership, certain assets of up to a total value of $2,525 are exempt under Federal Law

Corporations and Limited Liability Companies (LLC)

Since an incorporated business is an independent legal entity, all its assets are considered separate from you. Instead, the trustee will liquidate your portion of the shares in the company to repay creditors.

However, if the trustee finds that the stocks cannot be sold or finds that it won’t make enough money to make it worthwhile, he will transfer the shares back into your ownership.

Partnerships

In partnerships, all partners are liable in case of business debts. Assets are handled in the same way as in the case of sole proprietorships. However, this can absolve on or more of the business partners of much of their responsibility towards the debts, litigations are quite common after a partner has filed for bankruptcy.

However, the assets take too long to sell off or are not enough in value to justify selling them off; the assets will be abandoned by the trustee and given back to the partnership.

Hire an Attorney

Bankruptcy laws can be complex to understand and the legal process can be difficult to go through without the help of a legal attorney. If you need professional personalized legal advice on filing for Chapter 7 bankruptcy, contact The Law Offices Sean T. Flynn at 512.640.3340 or contact directly online.

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